Correlation Between SBM Offshore and Greencore Group

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

By analyzing existing cross correlation between SBM Offshore NV and Greencore Group PLC, you can compare the effects of market volatilities on SBM Offshore and Greencore Group 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 Greencore Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Greencore Group.

Diversification Opportunities for SBM Offshore and Greencore Group

-0.09

Correlation Coefficient

SBM Offshore  Greencore Group

Good diversification

The 3 months correlation between SBM and Greencore is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Greencore Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greencore Group PLC 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 NV are associated (or correlated) with Greencore Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greencore Group PLC has no effect on the direction of SBM Offshore i.e., SBM Offshore and Greencore Group go up and down completely randomly.

Pair Corralation between SBM Offshore and Greencore Group

Assuming the 90 days horizon SBM Offshore is expected to generate 2.01 times less return on investment than Greencore Group. In addition to that, SBM Offshore is 1.52 times more volatile than Greencore Group PLC. It trades about 0.03 of its total potential returns per unit of risk. Greencore Group PLC is currently generating about 0.09 per unit of volatility. If you would invest  315.00  in Greencore Group PLC on September 20, 2024 and sell it today you would earn a total of  725.00  from holding Greencore Group PLC or generate 230.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.18%
Values	Daily Returns

SBM Offshore NV  vs.  Greencore Group PLC

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM Offshore NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Greencore Group PLC

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Greencore Group PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Greencore Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBM Offshore and Greencore Group

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

The idea behind SBM Offshore NV and Greencore Group PLC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.