Correlation Between Noble Plc and SEB SA

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

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

Diversification Opportunities for Noble Plc and SEB SA

-0.37

Correlation Coefficient

Noble Plc  SEB SA

Very good diversification

The 3 months correlation between Noble and SEB is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and SEB SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEB SA 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 SEB SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEB SA has no effect on the direction of Noble Plc i.e., Noble Plc and SEB SA go up and down completely randomly.

Pair Corralation between Noble Plc and SEB SA

Allowing for the 90-day total investment horizon Noble plc is expected to under-perform the SEB SA. In addition to that, Noble Plc is 1.07 times more volatile than SEB SA. It trades about -0.08 of its total potential returns per unit of risk. SEB SA is currently generating about 0.04 per unit of volatility. If you would invest  1,110  in SEB SA on October 10, 2024 and sell it today you would earn a total of  92.00  from holding SEB SA or generate 8.29% return on investment over 90 days.

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

Noble plc  vs.  SEB SA

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.

SEB SA

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Noble Plc and SEB SA

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

The idea behind Noble plc and SEB SA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.