Correlation Between Tesla and Noble Plc

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

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

Diversification Opportunities for Tesla and Noble Plc

-0.66

Correlation Coefficient

Tesla  Noble Plc

Excellent diversification

The 3 months correlation between Tesla and Noble is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Noble plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble plc and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Noble Plc go up and down completely randomly.

Pair Corralation between Tesla and Noble Plc

Given the investment horizon of 90 days Tesla Inc is expected to under-perform the Noble Plc. In addition to that, Tesla is 1.7 times more volatile than Noble plc. It trades about -0.09 of its total potential returns per unit of risk. Noble plc is currently generating about -0.02 per unit of volatility. If you would invest  5,023  in Noble plc on January 23, 2024 and sell it today you would lose (390.00) from holding Noble plc or give up 7.76% of portfolio value over 90 days.

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

Tesla Inc  vs.  Noble plc

Tesla Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Noble plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Noble plc are ranked lower than 4 (%) 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.

Pair Trading with Tesla and Noble Plc

The main advantage of trading using opposite Tesla and Noble Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.