Correlation Between Dupont De and SBM Offshore

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

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

Diversification Opportunities for Dupont De and SBM Offshore

0.51

Correlation Coefficient

Dupont De  SBM Offshore

Very weak diversification

The 3 months correlation between Dupont and SBM is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and SBM Offshore go up and down completely randomly.

Pair Corralation between Dupont De and SBM Offshore

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the SBM Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 2.08 times less risky than SBM Offshore. The stock trades about -0.59 of its potential returns per unit of risk. The SBM Offshore NV is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,810  in SBM Offshore NV on October 10, 2024 and sell it today you would lose (44.00) from holding SBM Offshore NV or give up 2.43% of portfolio value over 90 days.

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

Dupont De Nemours  vs.  SBM Offshore NV

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SBM Offshore NV

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dupont De and SBM Offshore

The main advantage of trading using opposite Dupont De and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..