Correlation Between SBM OFFSHORE and Japan Medical

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

By analyzing existing cross correlation between SBM OFFSHORE and Japan Medical Dynamic, you can compare the effects of market volatilities on SBM OFFSHORE and Japan Medical 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 Japan Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and Japan Medical.

Diversification Opportunities for SBM OFFSHORE and Japan Medical

-0.23

Correlation Coefficient

SBM OFFSHORE  Japan Medical

Very good diversification

The 3 months correlation between SBM and Japan is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and Japan Medical Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Medical Dynamic 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 Japan Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Medical Dynamic has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and Japan Medical go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and Japan Medical

Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 0.84 times more return on investment than Japan Medical. However, SBM OFFSHORE is 1.19 times less risky than Japan Medical. It trades about 0.02 of its potential returns per unit of risk. Japan Medical Dynamic is currently generating about -0.15 per unit of risk. If you would invest  1,683  in SBM OFFSHORE on October 9, 2024 and sell it today you would earn a total of  17.00  from holding SBM OFFSHORE or generate 1.01% return on investment over 90 days.

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

SBM OFFSHORE  vs.  Japan Medical Dynamic

SBM OFFSHORE

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 1 (%) 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.

Japan Medical Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Medical Dynamic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SBM OFFSHORE and Japan Medical

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

The idea behind SBM OFFSHORE and Japan Medical Dynamic 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..