Correlation Between Endo International and SBM Offshore

Can any of the company-specific risk be diversified away by investing in both Endo International and SBM Offshore 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 Endo International and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Endo International PLC and SBM Offshore NV, you can compare the effects of market volatilities on Endo International and SBM Offshore 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 Endo International with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endo International and SBM Offshore.

Diversification Opportunities for Endo International and SBM Offshore

0.85

Correlation Coefficient

Endo International  SBM Offshore

Very poor diversification

The 3 months correlation between Endo and SBM is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Endo International PLC and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV and Endo International 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 Endo International PLC are associated (or correlated) with SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of Endo International i.e., Endo International and SBM Offshore go up and down completely randomly.

Pair Corralation between Endo International and SBM Offshore

Assuming the 90 days trading horizon Endo International is expected to generate 1.21 times less return on investment than SBM Offshore. But when comparing it to its historical volatility, Endo International PLC is 2.03 times less risky than SBM Offshore. It trades about 0.22 of its potential returns per unit of risk. SBM Offshore NV is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,692  in SBM Offshore NV on December 29, 2024 and sell it today you would earn a total of  319.00  from holding SBM Offshore NV or generate 18.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Endo International PLC  vs.  SBM Offshore NV

Endo International PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Endo International PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Endo International unveiled solid returns over the last few months and may actually be approaching a breakup point.

SBM Offshore NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, SBM Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Endo International and SBM Offshore

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

The idea behind Endo International PLC and SBM Offshore NV 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..