Correlation Between SBM OFFSHORE and OPERA SOFTWARE

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

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

Diversification Opportunities for SBM OFFSHORE and OPERA SOFTWARE

-0.45

Correlation Coefficient

SBM OFFSHORE  OPERA SOFTWARE

Very good diversification

The 3 months correlation between SBM and OPERA is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and OPERA SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPERA SOFTWARE 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 OPERA SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPERA SOFTWARE has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and OPERA SOFTWARE go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and OPERA SOFTWARE

Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 1.27 times more return on investment than OPERA SOFTWARE. However, SBM OFFSHORE is 1.27 times more volatile than OPERA SOFTWARE. It trades about 0.17 of its potential returns per unit of risk. OPERA SOFTWARE is currently generating about 0.04 per unit of risk. If you would invest  1,667  in SBM OFFSHORE on December 20, 2024 and sell it today you would earn a total of  359.00  from holding SBM OFFSHORE or generate 21.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

SBM OFFSHORE  vs.  OPERA SOFTWARE

SBM OFFSHORE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SBM OFFSHORE exhibited solid returns over the last few months and may actually be approaching a breakup point.

OPERA SOFTWARE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OPERA SOFTWARE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, OPERA SOFTWARE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SBM OFFSHORE and OPERA SOFTWARE

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

The idea behind SBM OFFSHORE and OPERA SOFTWARE 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.