Correlation Between SBM Offshore and Inspiration Healthcare

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

Diversification Opportunities for SBM Offshore and Inspiration Healthcare

0.05

Correlation Coefficient

SBM Offshore  Inspiration Healthcare

Significant diversification

The 3 months correlation between SBM and Inspiration is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Inspiration Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspiration Healthcare 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 Inspiration Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspiration Healthcare has no effect on the direction of SBM Offshore i.e., SBM Offshore and Inspiration Healthcare go up and down completely randomly.

Pair Corralation between SBM Offshore and Inspiration Healthcare

Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 0.42 times more return on investment than Inspiration Healthcare. However, SBM Offshore NV is 2.39 times less risky than Inspiration Healthcare. It trades about 0.04 of its potential returns per unit of risk. Inspiration Healthcare Group is currently generating about -0.05 per unit of risk. If you would invest  1,260  in SBM Offshore NV on October 4, 2024 and sell it today you would earn a total of  417.00  from holding SBM Offshore NV or generate 33.1% return on investment over 90 days.

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

SBM Offshore NV  vs.  Inspiration Healthcare Group

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Very 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.

Inspiration Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspiration Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SBM Offshore and Inspiration Healthcare

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

The idea behind SBM Offshore NV and Inspiration Healthcare Group 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.