Correlation Between Spectrum Brands and Noble Plc

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

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

Diversification Opportunities for Spectrum Brands and Noble Plc

0.29

Correlation Coefficient

Spectrum Brands  Noble Plc

Modest diversification

The 3 months correlation between Spectrum and Noble is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Brands Holdings and Noble plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble plc and Spectrum Brands 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 Spectrum Brands Holdings are associated (or correlated) with Noble Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noble plc has no effect on the direction of Spectrum Brands i.e., Spectrum Brands and Noble Plc go up and down completely randomly.

Pair Corralation between Spectrum Brands and Noble Plc

Considering the 90-day investment horizon Spectrum Brands Holdings is expected to under-perform the Noble Plc. But the stock apears to be less risky and, when comparing its historical volatility, Spectrum Brands Holdings is 1.75 times less risky than Noble Plc. The stock trades about -0.04 of its potential returns per unit of risk. The Noble plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,168  in Noble plc on October 24, 2024 and sell it today you would earn a total of  148.00  from holding Noble plc or generate 4.67% return on investment over 90 days.

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

Spectrum Brands Holdings  vs.  Noble plc

Spectrum Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Spectrum Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Noble plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Noble plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Noble Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Spectrum Brands and Noble Plc

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

The idea behind Spectrum Brands Holdings and Noble plc 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.