Correlation Between Noble Plc and Superior Drilling

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

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

Diversification Opportunities for Noble Plc and Superior Drilling

0.5

Correlation Coefficient

Noble Plc  Superior Drilling

Very weak diversification

The 3 months correlation between Noble and Superior is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and Superior Drilling Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Drilling 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 Superior Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Drilling has no effect on the direction of Noble Plc i.e., Noble Plc and Superior Drilling go up and down completely randomly.

Pair Corralation between Noble Plc and Superior Drilling

Allowing for the 90-day total investment horizon Noble Plc is expected to generate 8.53 times less return on investment than Superior Drilling. But when comparing it to its historical volatility, Noble plc is 1.5 times less risky than Superior Drilling. It trades about 0.03 of its potential returns per unit of risk. Superior Drilling Products is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  111.00  in Superior Drilling Products on February 16, 2024 and sell it today you would earn a total of  13.00  from holding Superior Drilling Products or generate 11.71% return on investment over 90 days.

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

Noble plc  vs.  Superior Drilling Products

Noble plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Noble plc are ranked lower than 7 (%) 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 June 2024.

Superior Drilling

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Superior Drilling Products are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Superior Drilling demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Noble Plc and Superior Drilling

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

The idea behind Noble plc and Superior Drilling Products 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.