Correlation Between SBM OFFSHORE and HEMISPHERE EGY

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

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

Diversification Opportunities for SBM OFFSHORE and HEMISPHERE EGY

0.13

Correlation Coefficient

SBM OFFSHORE  HEMISPHERE EGY

Average diversification

The 3 months correlation between SBM and HEMISPHERE is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and HEMISPHERE EGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEMISPHERE EGY 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 HEMISPHERE EGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEMISPHERE EGY has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and HEMISPHERE EGY go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and HEMISPHERE EGY

Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 1.56 times less return on investment than HEMISPHERE EGY. In addition to that, SBM OFFSHORE is 1.17 times more volatile than HEMISPHERE EGY. It trades about 0.05 of its total potential returns per unit of risk. HEMISPHERE EGY is currently generating about 0.1 per unit of volatility. If you would invest  69.00  in HEMISPHERE EGY on October 5, 2024 and sell it today you would earn a total of  54.00  from holding HEMISPHERE EGY or generate 78.26% return on investment over 90 days.

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

SBM OFFSHORE  vs.  HEMISPHERE EGY

SBM OFFSHORE

Risk-Adjusted Performance

0 of 100

Very 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.

HEMISPHERE EGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEMISPHERE EGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HEMISPHERE EGY is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SBM OFFSHORE and HEMISPHERE EGY

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

The idea behind SBM OFFSHORE and HEMISPHERE EGY 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.