Correlation Between SBM Offshore and BAE Systems

Can any of the company-specific risk be diversified away by investing in both SBM Offshore and BAE Systems 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 BAE Systems 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 BAE Systems plc, you can compare the effects of market volatilities on SBM Offshore and BAE Systems 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 BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and BAE Systems.

Diversification Opportunities for SBM Offshore and BAE Systems

0.0

Correlation Coefficient

SBM Offshore  BAE Systems

Pay attention - limited upside

The 3 months correlation between SBM and BAE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and BAE Systems plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAE Systems plc 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 BAE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAE Systems plc has no effect on the direction of SBM Offshore i.e., SBM Offshore and BAE Systems go up and down completely randomly.

Pair Corralation between SBM Offshore and BAE Systems

If you would invest  1,259  in SBM Offshore NV on October 24, 2024 and sell it today you would earn a total of  544.00  from holding SBM Offshore NV or generate 43.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

SBM Offshore NV  vs.  BAE Systems plc

SBM Offshore NV

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, SBM Offshore may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BAE Systems plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAE Systems plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BAE Systems is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SBM Offshore and BAE Systems

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

The idea behind SBM Offshore NV and BAE Systems 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.