Correlation Between Noble Corp and Northrop Grumman

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Can any of the company-specific risk be diversified away by investing in both Noble Corp and Northrop Grumman 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 Corp and Northrop Grumman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Noble Corp Plc and Northrop Grumman Corp, you can compare the effects of market volatilities on Noble Corp and Northrop Grumman 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 Corp with a short position of Northrop Grumman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noble Corp and Northrop Grumman.

Diversification Opportunities for Noble Corp and Northrop Grumman

  Correlation Coefficient

Very weak diversification

The 3 months correlation between Noble and Northrop is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Noble Corp Plc and Northrop Grumman Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrop Grumman Corp and Noble Corp 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 Corp Plc are associated (or correlated) with Northrop Grumman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrop Grumman Corp has no effect on the direction of Noble Corp i.e., Noble Corp and Northrop Grumman go up and down completely randomly.

Pair Corralation between Noble Corp and Northrop Grumman

Allowing for the 90-day total investment horizon Noble Corp Plc is expected to under-perform the Northrop Grumman. In addition to that, Noble Corp is 2.11 times more volatile than Northrop Grumman Corp. It trades about -0.17 of its total potential returns per unit of risk. Northrop Grumman Corp is currently generating about -0.09 per unit of volatility. If you would invest  49,448  in Northrop Grumman Corp on June 26, 2022 and sell it today you would lose (1,566)  from holding Northrop Grumman Corp or give up 3.17% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Noble Corp Plc  vs.  Northrop Grumman Corp

 Performance (%) 
Noble Corp Plc 
Noble Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Noble Corp Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Noble Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Noble Price Channel

Northrop Grumman Corp 
Northrop Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Northrop Grumman Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Northrop Grumman is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Northrop Price Channel

Noble Corp and Northrop Grumman Volatility Contrast

   Predicted Return Density   

Pair Trading with Noble Corp and Northrop Grumman

The main advantage of trading using opposite Noble Corp and Northrop Grumman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noble Corp position performs unexpectedly, Northrop Grumman 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 Northrop Grumman will offset losses from the drop in Northrop Grumman's long position.
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The idea behind Noble Corp Plc and Northrop Grumman Corp 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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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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