Correlation Between Independence Contract and Noble Plc

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

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

Diversification Opportunities for Independence Contract and Noble Plc

0.66

Correlation Coefficient

Independence Contract  Noble Plc

Poor diversification

The 3 months correlation between Independence and Noble is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Independence Contract Drilling and Noble plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble plc and Independence Contract 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 Independence Contract Drilling 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 Independence Contract i.e., Independence Contract and Noble Plc go up and down completely randomly.

Pair Corralation between Independence Contract and Noble Plc

Considering the 90-day investment horizon Independence Contract Drilling is expected to under-perform the Noble Plc. In addition to that, Independence Contract is 4.36 times more volatile than Noble plc. It trades about -0.14 of its total potential returns per unit of risk. Noble plc is currently generating about -0.03 per unit of volatility. If you would invest  4,053  in Noble plc on October 3, 2024 and sell it today you would lose (913.00) from holding Noble plc or give up 22.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	68.54%
Values	Daily Returns

Independence Contract Drilling  vs.  Noble plc

Independence Contract

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Independence Contract Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Independence Contract is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Noble plc

Risk-Adjusted Performance

0 of 100

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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Independence Contract and Noble Plc

The main advantage of trading using opposite Independence Contract and Noble Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independence Contract 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 Independence Contract Drilling 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.