Correlation Between SBM Offshore and Gamma Communications

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

Diversification Opportunities for SBM Offshore and Gamma Communications

-0.02

Correlation Coefficient

SBM Offshore  Gamma Communications

Good diversification

The 3 months correlation between SBM and Gamma is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Gamma Communications PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications PLC has no effect on the direction of SBM Offshore i.e., SBM Offshore and Gamma Communications go up and down completely randomly.

Pair Corralation between SBM Offshore and Gamma Communications

Assuming the 90 days trading horizon SBM Offshore is expected to generate 1.01 times less return on investment than Gamma Communications. In addition to that, SBM Offshore is 1.18 times more volatile than Gamma Communications PLC. It trades about 0.04 of its total potential returns per unit of risk. Gamma Communications PLC is currently generating about 0.05 per unit of volatility. If you would invest  112,317  in Gamma Communications PLC on October 4, 2024 and sell it today you would earn a total of  40,683  from holding Gamma Communications PLC or generate 36.22% return on investment over 90 days.

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

SBM Offshore NV  vs.  Gamma Communications PLC

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days SBM Offshore NV has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Gamma Communications PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications PLC 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.

Pair Trading with SBM Offshore and Gamma Communications

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

The idea behind SBM Offshore NV and Gamma Communications 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.