Correlation Between SIMON and SBM Offshore

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

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

Diversification Opportunities for SIMON and SBM Offshore

-0.03

Correlation Coefficient

SIMON  SBM Offshore

Good diversification

The 3 months correlation between SIMON and SBM is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding SIMON PPTY GROUP and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV and SIMON 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 SIMON PPTY GROUP 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 NV has no effect on the direction of SIMON i.e., SIMON and SBM Offshore go up and down completely randomly.

Pair Corralation between SIMON and SBM Offshore

Assuming the 90 days trading horizon SIMON PPTY GROUP is expected to under-perform the SBM Offshore. But the bond apears to be less risky and, when comparing its historical volatility, SIMON PPTY GROUP is 2.11 times less risky than SBM Offshore. The bond trades about -0.12 of its potential returns per unit of risk. The SBM Offshore NV is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,801  in SBM Offshore NV on September 15, 2024 and sell it today you would lose (111.00) from holding SBM Offshore NV or give up 6.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.44%
Values	Daily Returns

SIMON PPTY GROUP  vs.  SBM Offshore NV

SIMON PPTY GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIMON PPTY GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SIMON PPTY GROUP investors.

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.

Pair Trading with SIMON and SBM Offshore

The main advantage of trading using opposite SIMON and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMON 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 SIMON PPTY GROUP and SBM Offshore NV 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.