Correlation Between Wise Plc and SBM Offshore

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

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

Diversification Opportunities for Wise Plc and SBM Offshore

0.07

Correlation Coefficient

Wise Plc  SBM Offshore

Significant diversification

The 3 months correlation between Wise and SBM is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Wise plc 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 Wise Plc 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 Wise plc 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 Wise Plc i.e., Wise Plc and SBM Offshore go up and down completely randomly.

Pair Corralation between Wise Plc and SBM Offshore

Assuming the 90 days trading horizon Wise plc is expected to generate 1.15 times more return on investment than SBM Offshore. However, Wise Plc is 1.15 times more volatile than SBM Offshore NV. It trades about 0.07 of its potential returns per unit of risk. SBM Offshore NV is currently generating about 0.07 per unit of risk. If you would invest  64,100  in Wise plc on October 23, 2024 and sell it today you would earn a total of  38,400  from holding Wise plc or generate 59.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.49%
Values	Daily Returns

Wise plc  vs.  SBM Offshore NV

Wise plc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wise plc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Wise Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

SBM Offshore NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, SBM Offshore may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Wise Plc and SBM Offshore

The main advantage of trading using opposite Wise Plc and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wise Plc 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 Wise plc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.