Correlation Between Employers Holdings and Noble Plc

Can any of the company-specific risk be diversified away by investing in both Employers Holdings 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 Employers Holdings and Noble Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Employers Holdings and Noble plc, you can compare the effects of market volatilities on Employers Holdings 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 Employers Holdings with a short position of Noble Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Employers Holdings and Noble Plc.

Diversification Opportunities for Employers Holdings and Noble Plc

-0.02

Correlation Coefficient

Employers Holdings  Noble Plc

Good diversification

The 3 months correlation between Employers and Noble is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings and Noble plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble plc and Employers Holdings 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 Employers Holdings 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 Employers Holdings i.e., Employers Holdings and Noble Plc go up and down completely randomly.

Pair Corralation between Employers Holdings and Noble Plc

Considering the 90-day investment horizon Employers Holdings is expected to generate 0.57 times more return on investment than Noble Plc. However, Employers Holdings is 1.74 times less risky than Noble Plc. It trades about 0.04 of its potential returns per unit of risk. Noble plc is currently generating about -0.03 per unit of risk. If you would invest  4,000  in Employers Holdings on December 7, 2024 and sell it today you would earn a total of  945.00  from holding Employers Holdings or generate 23.63% return on investment over 90 days.

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

Employers Holdings  vs.  Noble plc

Employers Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Employers Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Employers Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Noble plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Noble plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Employers Holdings and Noble Plc

The main advantage of trading using opposite Employers Holdings and Noble Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Employers Holdings 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 Employers Holdings 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.