Correlation Between SBM Offshore and 654106AH6

Can any of the company-specific risk be diversified away by investing in both SBM Offshore and 654106AH6 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 654106AH6 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 NIKE INC, you can compare the effects of market volatilities on SBM Offshore and 654106AH6 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 654106AH6. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and 654106AH6.

Diversification Opportunities for SBM Offshore and 654106AH6

0.75

Correlation Coefficient

SBM Offshore  654106AH6

Poor diversification

The 3 months correlation between SBM and 654106AH6 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and NIKE INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 654106AH6 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 654106AH6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 654106AH6 has no effect on the direction of SBM Offshore i.e., SBM Offshore and 654106AH6 go up and down completely randomly.

Pair Corralation between SBM Offshore and 654106AH6

Assuming the 90 days horizon SBM Offshore NV is expected to generate 9.38 times more return on investment than 654106AH6. However, SBM Offshore is 9.38 times more volatile than NIKE INC. It trades about 0.08 of its potential returns per unit of risk. NIKE INC is currently generating about 0.0 per unit of risk. If you would invest  1,211  in SBM Offshore NV on September 23, 2024 and sell it today you would earn a total of  489.00  from holding SBM Offshore NV or generate 40.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	77.24%
Values	Daily Returns

SBM Offshore NV  vs.  NIKE INC

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 recent stock price disturbance, may contribute to short-term losses for the investors.

654106AH6

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIKE INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 654106AH6 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SBM Offshore and 654106AH6

The main advantage of trading using opposite SBM Offshore and 654106AH6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, 654106AH6 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 654106AH6 will offset losses from the drop in 654106AH6's long position.

The idea behind SBM Offshore NV and NIKE INC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.