Correlation Between Noble Plc and Daybreak Oil

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

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

Diversification Opportunities for Noble Plc and Daybreak Oil

-0.22

Correlation Coefficient

Noble Plc  Daybreak Oil

Very good diversification

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

Pair Corralation between Noble Plc and Daybreak Oil

Allowing for the 90-day total investment horizon Noble plc is expected to under-perform the Daybreak Oil. But the stock apears to be less risky and, when comparing its historical volatility, Noble plc is 27.95 times less risky than Daybreak Oil. The stock trades about -0.05 of its potential returns per unit of risk. The Daybreak Oil and is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.40  in Daybreak Oil and on September 12, 2024 and sell it today you would lose (2.37) from holding Daybreak Oil and or give up 98.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Noble plc  vs.  Daybreak Oil and

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.

Daybreak Oil

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daybreak Oil and are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Daybreak Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Noble Plc and Daybreak Oil

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

The idea behind Noble plc and Daybreak Oil and 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.