Correlation Between Regions Financial and SBM Offshore

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

By analyzing existing cross correlation between Regions Financial Corp and SBM Offshore NV, you can compare the effects of market volatilities on Regions Financial and SBM Offshore 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 Regions Financial with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regions Financial and SBM Offshore.

Diversification Opportunities for Regions Financial and SBM Offshore

-0.58

Correlation Coefficient

Regions Financial  SBM Offshore

Excellent diversification

The 3 months correlation between Regions and SBM is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial Corp and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV and Regions Financial 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 Regions Financial Corp are associated (or correlated) with SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of Regions Financial i.e., Regions Financial and SBM Offshore go up and down completely randomly.

Pair Corralation between Regions Financial and SBM Offshore

Assuming the 90 days trading horizon Regions Financial Corp is expected to under-perform the SBM Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Regions Financial Corp is 1.5 times less risky than SBM Offshore. The stock trades about -0.08 of its potential returns per unit of risk. The SBM Offshore NV is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,676  in SBM Offshore NV on December 23, 2024 and sell it today you would earn a total of  363.00  from holding SBM Offshore NV or generate 21.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Regions Financial Corp  vs.  SBM Offshore NV

Regions Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regions Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SBM Offshore NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, SBM Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regions Financial and SBM Offshore

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

The idea behind Regions Financial Corp and SBM Offshore NV 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.