Correlation Between Sable Offshore and Smurfit WestRock

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

By analyzing existing cross correlation between Sable Offshore Corp and Smurfit WestRock plc, you can compare the effects of market volatilities on Sable Offshore and Smurfit WestRock 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 Sable Offshore with a short position of Smurfit WestRock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sable Offshore and Smurfit WestRock.

Diversification Opportunities for Sable Offshore and Smurfit WestRock

0.21

Correlation Coefficient

Sable Offshore  Smurfit WestRock

Modest diversification

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

Pair Corralation between Sable Offshore and Smurfit WestRock

Considering the 90-day investment horizon Sable Offshore Corp is expected to generate 2.24 times more return on investment than Smurfit WestRock. However, Sable Offshore is 2.24 times more volatile than Smurfit WestRock plc. It trades about 0.11 of its potential returns per unit of risk. Smurfit WestRock plc is currently generating about -0.08 per unit of risk. If you would invest  1,964  in Sable Offshore Corp on December 18, 2024 and sell it today you would earn a total of  572.00  from holding Sable Offshore Corp or generate 29.12% return on investment over 90 days.

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

Sable Offshore Corp  vs.  Smurfit WestRock plc

Sable Offshore Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sable Offshore Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Sable Offshore exhibited solid returns over the last few months and may actually be approaching a breakup point.

Smurfit WestRock plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smurfit WestRock plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Sable Offshore and Smurfit WestRock

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

The idea behind Sable Offshore Corp and Smurfit WestRock 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.