Correlation Between Science Applications and SBM OFFSHORE

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

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

Diversification Opportunities for Science Applications and SBM OFFSHORE

0.17

Correlation Coefficient

Science Applications  SBM OFFSHORE

Average diversification

The 3 months correlation between Science and SBM is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE and Science Applications 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 Science Applications International 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 Science Applications i.e., Science Applications and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between Science Applications and SBM OFFSHORE

Assuming the 90 days trading horizon Science Applications International is expected to under-perform the SBM OFFSHORE. In addition to that, Science Applications is 1.43 times more volatile than SBM OFFSHORE. It trades about -0.37 of its total potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.01 per unit of volatility. If you would invest  1,676  in SBM OFFSHORE on October 4, 2024 and sell it today you would earn a total of  2.00  from holding SBM OFFSHORE or generate 0.12% return on investment over 90 days.

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

Science Applications Internati  vs.  SBM OFFSHORE

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

SBM OFFSHORE

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days SBM OFFSHORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SBM OFFSHORE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Science Applications and SBM OFFSHORE

The main advantage of trading using opposite Science Applications and SBM OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications 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 Science Applications International 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.