Correlation Between Scottish Mortgage and SBM OFFSHORE

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

By analyzing existing cross correlation between Scottish Mortgage Investment and SBM OFFSHORE, you can compare the effects of market volatilities on Scottish Mortgage 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 Scottish Mortgage with a short position of SBM OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scottish Mortgage and SBM OFFSHORE.

Diversification Opportunities for Scottish Mortgage and SBM OFFSHORE

0.08

Correlation Coefficient

Scottish Mortgage  SBM OFFSHORE

Significant diversification

The 3 months correlation between Scottish and SBM is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Scottish Mortgage Investment and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE and Scottish Mortgage 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 Scottish Mortgage Investment 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 has no effect on the direction of Scottish Mortgage i.e., Scottish Mortgage and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between Scottish Mortgage and SBM OFFSHORE

Assuming the 90 days trading horizon Scottish Mortgage is expected to generate 1.11 times less return on investment than SBM OFFSHORE. But when comparing it to its historical volatility, Scottish Mortgage Investment is 1.02 times less risky than SBM OFFSHORE. It trades about 0.11 of its potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,698  in SBM OFFSHORE on October 11, 2024 and sell it today you would earn a total of  34.00  from holding SBM OFFSHORE or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Scottish Mortgage Investment  vs.  SBM OFFSHORE

Scottish Mortgage

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Scottish Mortgage reported solid returns over the last few months and may actually be approaching a breakup point.

SBM OFFSHORE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SBM OFFSHORE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Scottish Mortgage and SBM OFFSHORE

The main advantage of trading using opposite Scottish Mortgage and SBM OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scottish Mortgage 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 Scottish Mortgage Investment and SBM OFFSHORE 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.