Correlation Between Noble Plc and General Dynamics

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

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

Diversification Opportunities for Noble Plc and General Dynamics

0.74

Correlation Coefficient

Noble Plc  General Dynamics

Poor diversification

The 3 months correlation between Noble and General is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics 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 General Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of Noble Plc i.e., Noble Plc and General Dynamics go up and down completely randomly.

Pair Corralation between Noble Plc and General Dynamics

Allowing for the 90-day total investment horizon Noble plc is expected to under-perform the General Dynamics. In addition to that, Noble Plc is 1.26 times more volatile than General Dynamics. It trades about -0.09 of its total potential returns per unit of risk. General Dynamics is currently generating about 0.06 per unit of volatility. If you would invest  27,699  in General Dynamics on January 26, 2024 and sell it today you would earn a total of  412.00  from holding General Dynamics or generate 1.49% return on investment over 90 days.

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

Noble plc  vs.  General Dynamics

Noble plc

Risk-Adjusted Performance

3 of 100

Weak

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 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.

General Dynamics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, General Dynamics may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Noble Plc and General Dynamics

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

The idea behind Noble plc and General Dynamics 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.