Correlation Between SPECTRAL MEDICAL and SBM OFFSHORE

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

By analyzing existing cross correlation between SPECTRAL MEDICAL and SBM OFFSHORE, you can compare the effects of market volatilities on SPECTRAL MEDICAL and SBM 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 SPECTRAL MEDICAL with a short position of SBM OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPECTRAL MEDICAL and SBM OFFSHORE.

Diversification Opportunities for SPECTRAL MEDICAL and SBM OFFSHORE

0.85

Correlation Coefficient

SPECTRAL MEDICAL  SBM OFFSHORE

Very poor diversification

The 3 months correlation between SPECTRAL and SBM is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SPECTRAL MEDICAL and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE and SPECTRAL MEDICAL 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 SPECTRAL MEDICAL are associated (or correlated) with SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of SPECTRAL MEDICAL i.e., SPECTRAL MEDICAL and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between SPECTRAL MEDICAL and SBM OFFSHORE

Assuming the 90 days horizon SPECTRAL MEDICAL is expected to generate 2.33 times more return on investment than SBM OFFSHORE. However, SPECTRAL MEDICAL is 2.33 times more volatile than SBM OFFSHORE. It trades about 0.14 of its potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.17 per unit of risk. If you would invest  30.00  in SPECTRAL MEDICAL on December 20, 2024 and sell it today you would earn a total of  12.00  from holding SPECTRAL MEDICAL or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

SPECTRAL MEDICAL  vs.  SBM OFFSHORE

SPECTRAL MEDICAL

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPECTRAL MEDICAL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SPECTRAL MEDICAL reported solid returns over the last few months and may actually be approaching a breakup point.

SBM OFFSHORE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SBM OFFSHORE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPECTRAL MEDICAL and SBM OFFSHORE

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

The idea behind SPECTRAL MEDICAL and SBM OFFSHORE 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.