Correlation Between Noble Plc and Whitecap Resources

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

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

Diversification Opportunities for Noble Plc and Whitecap Resources

0.72

Correlation Coefficient

Noble Plc  Whitecap Resources

Poor diversification

The 3 months correlation between Noble and Whitecap is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and Whitecap Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitecap Resources 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 Whitecap Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitecap Resources has no effect on the direction of Noble Plc i.e., Noble Plc and Whitecap Resources go up and down completely randomly.

Pair Corralation between Noble Plc and Whitecap Resources

Allowing for the 90-day total investment horizon Noble plc is expected to under-perform the Whitecap Resources. But the stock apears to be less risky and, when comparing its historical volatility, Noble plc is 1.01 times less risky than Whitecap Resources. The stock trades about -0.11 of its potential returns per unit of risk. The Whitecap Resources is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  692.00  in Whitecap Resources on December 28, 2024 and sell it today you would lose (34.00) from holding Whitecap Resources or give up 4.91% 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.  Whitecap Resources

Noble plc

Risk-Adjusted Performance

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

Whitecap Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whitecap Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Whitecap Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Noble Plc and Whitecap Resources

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

The idea behind Noble plc and Whitecap Resources 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.