Correlation Between Noble Plc and Transocean

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

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

Diversification Opportunities for Noble Plc and Transocean

0.94

Correlation Coefficient

Noble Plc  Transocean

Almost no diversification

The 3 months correlation between Noble and Transocean is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Noble Plc i.e., Noble Plc and Transocean go up and down completely randomly.

Pair Corralation between Noble Plc and Transocean

Allowing for the 90-day total investment horizon Noble Plc is expected to generate 1.52 times less return on investment than Transocean. But when comparing it to its historical volatility, Noble plc is 1.47 times less risky than Transocean. It trades about 0.04 of its potential returns per unit of risk. Transocean is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  353.00  in Transocean on January 31, 2024 and sell it today you would earn a total of  234.00  from holding Transocean or generate 66.29% return on investment over 90 days.

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

Noble plc  vs.  Transocean

Noble plc

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Noble plc are ranked lower than 5 (%) 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 May 2024.

Transocean

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transocean are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Transocean may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Noble Plc and Transocean

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

The idea behind Noble plc and Transocean 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.