Correlation Between SBM OFFSHORE and MOWI ASA

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

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

Diversification Opportunities for SBM OFFSHORE and MOWI ASA

0.26

Correlation Coefficient

SBM OFFSHORE  MOWI ASA

Modest diversification

The 3 months correlation between SBM and MOWI is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and MOWI ASA SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOWI ASA SPADR 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 MOWI ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOWI ASA SPADR has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and MOWI ASA go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and MOWI ASA

Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 1.23 times less return on investment than MOWI ASA. In addition to that, SBM OFFSHORE is 1.16 times more volatile than MOWI ASA SPADR. It trades about 0.04 of its total potential returns per unit of risk. MOWI ASA SPADR is currently generating about 0.06 per unit of volatility. If you would invest  1,577  in MOWI ASA SPADR on October 10, 2024 and sell it today you would earn a total of  63.00  from holding MOWI ASA SPADR or generate 3.99% return on investment over 90 days.

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

SBM OFFSHORE  vs.  MOWI ASA SPADR

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.

MOWI ASA SPADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MOWI ASA SPADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, MOWI ASA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SBM OFFSHORE and MOWI ASA

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

The idea behind SBM OFFSHORE and MOWI ASA SPADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.