Correlation Between Noble Plc and Burlington Stores

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

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

Diversification Opportunities for Noble Plc and Burlington Stores

0.22

Correlation Coefficient

Noble Plc  Burlington Stores

Modest diversification

The 3 months correlation between Noble and Burlington is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Noble Plc 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 Noble plc are associated (or correlated) with Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of Noble Plc i.e., Noble Plc and Burlington Stores go up and down completely randomly.

Pair Corralation between Noble Plc and Burlington Stores

Allowing for the 90-day total investment horizon Noble plc is expected to under-perform the Burlington Stores. In addition to that, Noble Plc is 1.34 times more volatile than Burlington Stores. It trades about -0.02 of its total potential returns per unit of risk. Burlington Stores is currently generating about 0.07 per unit of volatility. If you would invest  26,732  in Burlington Stores on September 5, 2024 and sell it today you would earn a total of  1,852  from holding Burlington Stores or generate 6.93% return on investment over 90 days.

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

Noble plc  vs.  Burlington Stores

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 rather sound technical and fundamental indicators, Noble Plc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Burlington Stores

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Burlington Stores may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Noble Plc and Burlington Stores

The main advantage of trading using opposite Noble Plc and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noble Plc position performs unexpectedly, Burlington Stores 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 Burlington Stores will offset losses from the drop in Burlington Stores' long position.

The idea behind Noble plc and Burlington Stores 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.