Correlation Between American Vanguard and Noble Plc

Can any of the company-specific risk be diversified away by investing in both American Vanguard and Noble Plc at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Vanguard and Noble Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Vanguard and Noble plc, you can compare the effects of market volatilities on American Vanguard and Noble Plc and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Vanguard with a short position of Noble Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Vanguard and Noble Plc.

Diversification Opportunities for American Vanguard and Noble Plc

0.58

Correlation Coefficient

American Vanguard  Noble Plc

Very weak diversification

The 3 months correlation between American and Noble is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding American Vanguard and Noble plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble plc and American Vanguard is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Vanguard are associated (or correlated) with Noble Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noble plc has no effect on the direction of American Vanguard i.e., American Vanguard and Noble Plc go up and down completely randomly.

Pair Corralation between American Vanguard and Noble Plc

Considering the 90-day investment horizon American Vanguard is expected to under-perform the Noble Plc. In addition to that, American Vanguard is 1.66 times more volatile than Noble plc. It trades about -0.01 of its total potential returns per unit of risk. Noble plc is currently generating about -0.01 per unit of volatility. If you would invest  3,380  in Noble plc on October 26, 2024 and sell it today you would lose (40.00) from holding Noble plc or give up 1.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

American Vanguard  vs.  Noble plc

American Vanguard

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Vanguard are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, American Vanguard may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Noble plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Noble plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Noble Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with American Vanguard and Noble Plc

The main advantage of trading using opposite American Vanguard and Noble Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Vanguard position performs unexpectedly, Noble Plc can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Noble Plc will offset losses from the drop in Noble Plc's long position.

The idea behind American Vanguard and Noble plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.