Correlation Between Noble Plc and Headwater Exploration
Can any of the company-specific risk be diversified away by investing in both Noble Plc and Headwater Exploration 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 Headwater Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Noble plc and Headwater Exploration, you can compare the effects of market volatilities on Noble Plc and Headwater Exploration 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 Headwater Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noble Plc and Headwater Exploration.
Diversification Opportunities for Noble Plc and Headwater Exploration
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Noble and Headwater is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and Headwater Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Exploration 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 Headwater Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Headwater Exploration has no effect on the direction of Noble Plc i.e., Noble Plc and Headwater Exploration go up and down completely randomly.
Pair Corralation between Noble Plc and Headwater Exploration
Allowing for the 90-day total investment horizon Noble plc is expected to under-perform the Headwater Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Noble plc is 1.07 times less risky than Headwater Exploration. The stock trades about -0.32 of its potential returns per unit of risk. The Headwater Exploration is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 463.00 in Headwater Exploration on December 2, 2024 and sell it today you would lose (25.00) from holding Headwater Exploration or give up 5.4% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Noble plc vs. Headwater Exploration
Performance |
Timeline |
Noble plc |
Headwater Exploration |
Noble Plc and Headwater Exploration Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Noble Plc and Headwater Exploration
The main advantage of trading using opposite Noble Plc and Headwater Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noble Plc position performs unexpectedly, Headwater Exploration 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 Headwater Exploration will offset losses from the drop in Headwater Exploration's long position.Noble Plc vs. Seadrill Limited | Noble Plc vs. Borr Drilling | Noble Plc vs. Patterson UTI Energy | Noble Plc vs. Transocean |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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