Correlation Between Weibo Corp and SBM Offshore

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

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

Diversification Opportunities for Weibo Corp and SBM Offshore

-0.42

Correlation Coefficient

Weibo Corp  SBM Offshore

Very good diversification

The 3 months correlation between Weibo and SBM is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp 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 Weibo Corp 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 Weibo Corp 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 Weibo Corp i.e., Weibo Corp and SBM Offshore go up and down completely randomly.

Pair Corralation between Weibo Corp and SBM Offshore

Allowing for the 90-day total investment horizon Weibo Corp is expected to under-perform the SBM Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Weibo Corp is 1.58 times less risky than SBM Offshore. The stock trades about -0.01 of its potential returns per unit of risk. The SBM Offshore NV is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,577  in SBM Offshore NV on September 20, 2024 and sell it today you would earn a total of  123.00  from holding SBM Offshore NV or generate 7.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	72.32%
Values	Daily Returns

Weibo Corp  vs.  SBM Offshore NV

Weibo Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Weibo Corp and SBM Offshore

The main advantage of trading using opposite Weibo Corp and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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 Weibo Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.