Correlation Between SBM Offshore and Sable Offshore

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

Diversification Opportunities for SBM Offshore and Sable Offshore

0.21

Correlation Coefficient

SBM Offshore  Sable Offshore

Modest diversification

The 3 months correlation between SBM and Sable is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Sable Offshore Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sable Offshore Corp 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 Sable Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sable Offshore Corp has no effect on the direction of SBM Offshore i.e., SBM Offshore and Sable Offshore go up and down completely randomly.

Pair Corralation between SBM Offshore and Sable Offshore

Assuming the 90 days horizon SBM Offshore is expected to generate 1.44 times less return on investment than Sable Offshore. In addition to that, SBM Offshore is 1.58 times more volatile than Sable Offshore Corp. It trades about 0.03 of its total potential returns per unit of risk. Sable Offshore Corp is currently generating about 0.07 per unit of volatility. If you would invest  1,005  in Sable Offshore Corp on September 20, 2024 and sell it today you would earn a total of  1,128  from holding Sable Offshore Corp or generate 112.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.5%
Values	Daily Returns

SBM Offshore NV  vs.  Sable Offshore Corp

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.

Sable Offshore Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sable Offshore Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sable Offshore is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SBM Offshore and Sable Offshore

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

The idea behind SBM Offshore NV and Sable Offshore Corp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.