Correlation Between SBM Offshore and Lloyds Banking

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

Diversification Opportunities for SBM Offshore and Lloyds Banking

-0.39

Correlation Coefficient

SBM Offshore  Lloyds Banking

Very good diversification

The 3 months correlation between SBM and Lloyds is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group 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 Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of SBM Offshore i.e., SBM Offshore and Lloyds Banking go up and down completely randomly.

Pair Corralation between SBM Offshore and Lloyds Banking

Assuming the 90 days trading horizon SBM Offshore NV is expected to under-perform the Lloyds Banking. In addition to that, SBM Offshore is 1.74 times more volatile than Lloyds Banking Group. It trades about -0.06 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.03 per unit of volatility. If you would invest  5,460  in Lloyds Banking Group on September 14, 2024 and sell it today you would earn a total of  40.00  from holding Lloyds Banking Group or generate 0.73% 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.  Lloyds Banking Group

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.

Lloyds Banking Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lloyds Banking Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lloyds Banking 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 Lloyds Banking

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

The idea behind SBM Offshore NV and Lloyds Banking 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.