Correlation Between SBM OFFSHORE and Waste Management
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and Waste Management 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 Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM OFFSHORE and Waste Management, you can compare the effects of market volatilities on SBM OFFSHORE and Waste Management 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 Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and Waste Management.
Diversification Opportunities for SBM OFFSHORE and Waste Management
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and Waste is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and Waste Management go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and Waste Management
Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 1.43 times more return on investment than Waste Management. However, SBM OFFSHORE is 1.43 times more volatile than Waste Management. It trades about -0.21 of its potential returns per unit of risk. Waste Management is currently generating about -0.51 per unit of risk. If you would invest 1,776 in SBM OFFSHORE on September 26, 2024 and sell it today you would lose (104.00) from holding SBM OFFSHORE or give up 5.86% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
SBM OFFSHORE vs. Waste Management
Performance |
Timeline |
SBM OFFSHORE |
Waste Management |
SBM OFFSHORE and Waste Management Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SBM OFFSHORE and Waste Management
The main advantage of trading using opposite SBM OFFSHORE and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, Waste Management 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 Waste Management will offset losses from the drop in Waste Management's long position.SBM OFFSHORE vs. Sabra Health Care | SBM OFFSHORE vs. Global Ship Lease | SBM OFFSHORE vs. Amkor Technology | SBM OFFSHORE vs. CVS Health |
Waste Management vs. Republic Services | Waste Management vs. Waste Connections | Waste Management vs. Veolia Environnement SA | Waste Management vs. Veolia Environnement SA |
Check out your portfolio center.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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