Correlation Between TGS NOPEC and Subsea 7

Can any of the company-specific risk be diversified away by investing in both TGS NOPEC and Subsea 7 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 TGS NOPEC and Subsea 7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TGS NOPEC Geophysical and Subsea 7 SA, you can compare the effects of market volatilities on TGS NOPEC and Subsea 7 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 TGS NOPEC with a short position of Subsea 7. Check out your portfolio center. Please also check ongoing floating volatility patterns of TGS NOPEC and Subsea 7.

Diversification Opportunities for TGS NOPEC and Subsea 7

0.94

Correlation Coefficient

TGS NOPEC  Subsea 7

Almost no diversification

The 3 months correlation between TGS and Subsea is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding TGS NOPEC Geophysical and Subsea 7 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Subsea 7 SA and TGS NOPEC 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 TGS NOPEC Geophysical are associated (or correlated) with Subsea 7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Subsea 7 SA has no effect on the direction of TGS NOPEC i.e., TGS NOPEC and Subsea 7 go up and down completely randomly.

Pair Corralation between TGS NOPEC and Subsea 7

Assuming the 90 days trading horizon TGS NOPEC Geophysical is expected to under-perform the Subsea 7. In addition to that, TGS NOPEC is 1.17 times more volatile than Subsea 7 SA. It trades about -0.07 of its total potential returns per unit of risk. Subsea 7 SA is currently generating about -0.05 per unit of volatility. If you would invest  18,010  in Subsea 7 SA on December 29, 2024 and sell it today you would lose (1,080) from holding Subsea 7 SA or give up 6.0% of portfolio value over 90 days.

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

TGS NOPEC Geophysical  vs.  Subsea 7 SA

TGS NOPEC Geophysical

Risk-Adjusted Performance

Very Weak

Over the last 90 days TGS NOPEC Geophysical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Subsea 7 SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Subsea 7 SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Subsea 7 is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with TGS NOPEC and Subsea 7

The main advantage of trading using opposite TGS NOPEC and Subsea 7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TGS NOPEC position performs unexpectedly, Subsea 7 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 Subsea 7 will offset losses from the drop in Subsea 7's long position.

The idea behind TGS NOPEC Geophysical and Subsea 7 SA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.