Correlation Between Air Transport and SBM Offshore

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

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

Diversification Opportunities for Air Transport and SBM Offshore

0.79

Correlation Coefficient

Air Transport  SBM Offshore

Poor diversification

The 3 months correlation between Air and SBM is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services 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 Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and SBM Offshore go up and down completely randomly.

Pair Corralation between Air Transport and SBM Offshore

Given the investment horizon of 90 days Air Transport Services is expected to generate 2.95 times more return on investment than SBM Offshore. However, Air Transport is 2.95 times more volatile than SBM Offshore NV. It trades about 0.15 of its potential returns per unit of risk. SBM Offshore NV is currently generating about 0.06 per unit of risk. If you would invest  1,569  in Air Transport Services on September 2, 2024 and sell it today you would earn a total of  627.00  from holding Air Transport Services or generate 39.96% return on investment over 90 days.

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

Air Transport Services  vs.  SBM Offshore NV

Air Transport Services

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

SBM Offshore NV

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Air Transport and SBM Offshore

The main advantage of trading using opposite Air Transport and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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 Air Transport Services 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.