Correlation Between Noble Plc and Owens Corning

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

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

Diversification Opportunities for Noble Plc and Owens Corning

0.89

Correlation Coefficient

Noble Plc  Owens Corning

Very poor diversification

The 3 months correlation between Noble and Owens is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning 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 Owens Corning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Owens Corning has no effect on the direction of Noble Plc i.e., Noble Plc and Owens Corning go up and down completely randomly.

Pair Corralation between Noble Plc and Owens Corning

Allowing for the 90-day total investment horizon Noble Plc is expected to generate 2.92 times less return on investment than Owens Corning. In addition to that, Noble Plc is 1.25 times more volatile than Owens Corning. It trades about 0.03 of its total potential returns per unit of risk. Owens Corning is currently generating about 0.11 per unit of volatility. If you would invest  9,572  in Owens Corning on January 24, 2024 and sell it today you would earn a total of  6,872  from holding Owens Corning or generate 71.79% return on investment over 90 days.

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

Noble plc  vs.  Owens Corning

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 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.

Owens Corning

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Owens Corning are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Owens Corning exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Noble Plc and Owens Corning

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

The idea behind Noble plc and Owens Corning 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.