Correlation Between SBM Offshore and Darden Restaurants

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

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

Diversification Opportunities for SBM Offshore and Darden Restaurants

0.35

Correlation Coefficient

SBM Offshore  Darden Restaurants

Weak diversification

The 3 months correlation between SBM and Darden is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and SBM Offshore 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 SBM Offshore NV are associated (or correlated) with Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of SBM Offshore i.e., SBM Offshore and Darden Restaurants go up and down completely randomly.

Pair Corralation between SBM Offshore and Darden Restaurants

Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 1.18 times more return on investment than Darden Restaurants. However, SBM Offshore is 1.18 times more volatile than Darden Restaurants. It trades about 0.1 of its potential returns per unit of risk. Darden Restaurants is currently generating about 0.05 per unit of risk. If you would invest  1,343  in SBM Offshore NV on September 15, 2024 and sell it today you would earn a total of  336.00  from holding SBM Offshore NV or generate 25.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.9%
Values	Daily Returns

SBM Offshore NV  vs.  Darden Restaurants

SBM Offshore NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, SBM Offshore is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Darden Restaurants

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Darden Restaurants is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SBM Offshore and Darden Restaurants

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

The idea behind SBM Offshore NV and Darden Restaurants 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.