Correlation Between Highway Holdings and Noble Plc

Can any of the company-specific risk be diversified away by investing in both Highway 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 Highway 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 Highway Holdings Limited and Noble plc, you can compare the effects of market volatilities on Highway 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 Highway Holdings with a short position of Noble Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Noble Plc.

Diversification Opportunities for Highway Holdings and Noble Plc

-0.09

Correlation Coefficient

Highway Holdings  Noble Plc

Good diversification

The 3 months correlation between Highway and Noble is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Noble plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble plc and Highway 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 Highway Holdings Limited 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 Highway Holdings i.e., Highway Holdings and Noble Plc go up and down completely randomly.

Pair Corralation between Highway Holdings and Noble Plc

Given the investment horizon of 90 days Highway Holdings is expected to generate 12.6 times less return on investment than Noble Plc. But when comparing it to its historical volatility, Highway Holdings Limited is 1.35 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 0.42 of returns per unit of risk over similar time horizon. If you would invest  2,885  in Noble plc on October 20, 2024 and sell it today you would earn a total of  469.00  from holding Noble plc or generate 16.26% return on investment over 90 days.

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

Highway Holdings Limited  vs.  Noble plc

Highway Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Highway Holdings is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Noble plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Noble plc are ranked lower than 3 (%) 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 Highway Holdings and Noble Plc

The main advantage of trading using opposite Highway Holdings and Noble Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway 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 Highway Holdings Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.