Correlation Between SBM Offshore and Virgin Wines

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

Diversification Opportunities for SBM Offshore and Virgin Wines

0.35

Correlation Coefficient

SBM Offshore  Virgin Wines

Weak diversification

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

Pair Corralation between SBM Offshore and Virgin Wines

Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 0.96 times more return on investment than Virgin Wines. However, SBM Offshore NV is 1.04 times less risky than Virgin Wines. It trades about 0.15 of its potential returns per unit of risk. Virgin Wines UK is currently generating about 0.02 per unit of risk. If you would invest  1,717  in SBM Offshore NV on November 29, 2024 and sell it today you would earn a total of  347.00  from holding SBM Offshore NV or generate 20.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

SBM Offshore NV  vs.  Virgin Wines UK

SBM Offshore NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, SBM Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Virgin Wines UK

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Wines UK are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Virgin Wines is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SBM Offshore and Virgin Wines

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

The idea behind SBM Offshore NV and Virgin Wines UK 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.