Correlation Between SBM Offshore and Sun Country

Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Sun Country 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 Sun Country 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 Sun Country Airlines, you can compare the effects of market volatilities on SBM Offshore and Sun Country 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 Sun Country. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Sun Country.

Diversification Opportunities for SBM Offshore and Sun Country

0.8

Correlation Coefficient

SBM Offshore  Sun Country

Very poor diversification

The 3 months correlation between SBM and Sun is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Sun Country Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Country Airlines 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 Sun Country. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Country Airlines has no effect on the direction of SBM Offshore i.e., SBM Offshore and Sun Country go up and down completely randomly.

Pair Corralation between SBM Offshore and Sun Country

Assuming the 90 days horizon SBM Offshore NV is expected to generate 0.69 times more return on investment than Sun Country. However, SBM Offshore NV is 1.46 times less risky than Sun Country. It trades about 0.11 of its potential returns per unit of risk. Sun Country Airlines is currently generating about -0.01 per unit of risk. If you would invest  1,211  in SBM Offshore NV on September 2, 2024 and sell it today you would earn a total of  669.00  from holding SBM Offshore NV or generate 55.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	77.42%
Values	Daily Returns

SBM Offshore NV  vs.  Sun Country Airlines

SBM Offshore NV

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Sun Country Airlines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Country Airlines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Sun Country showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBM Offshore and Sun Country

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

The idea behind SBM Offshore NV and Sun Country Airlines 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.