Correlation Between SBM OFFSHORE and ENTAIN PLC

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

By analyzing existing cross correlation between SBM OFFSHORE and ENTAIN PLC UNSPADR1, you can compare the effects of market volatilities on SBM OFFSHORE and ENTAIN PLC 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 SBM OFFSHORE with a short position of ENTAIN PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and ENTAIN PLC.

Diversification Opportunities for SBM OFFSHORE and ENTAIN PLC

0.02

Correlation Coefficient

SBM OFFSHORE  ENTAIN PLC

Significant diversification

The 3 months correlation between SBM and ENTAIN is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and ENTAIN PLC UNSPADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENTAIN PLC UNSPADR1 and SBM OFFSHORE 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 SBM OFFSHORE are associated (or correlated) with ENTAIN PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENTAIN PLC UNSPADR1 has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and ENTAIN PLC go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and ENTAIN PLC

Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 0.8 times more return on investment than ENTAIN PLC. However, SBM OFFSHORE is 1.25 times less risky than ENTAIN PLC. It trades about -0.04 of its potential returns per unit of risk. ENTAIN PLC UNSPADR1 is currently generating about -0.09 per unit of risk. If you would invest  1,782  in SBM OFFSHORE on October 10, 2024 and sell it today you would lose (50.00) from holding SBM OFFSHORE or give up 2.81% of portfolio value over 90 days.

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

SBM OFFSHORE  vs.  ENTAIN PLC UNSPADR1

SBM OFFSHORE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 3 (%) 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.

ENTAIN PLC UNSPADR1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENTAIN PLC UNSPADR1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SBM OFFSHORE and ENTAIN PLC

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

The idea behind SBM OFFSHORE and ENTAIN PLC UNSPADR1 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.