Correlation Between SBM Offshore and Scandic Hotels
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Scandic Hotels 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 SBM Offshore and Scandic Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM Offshore NV and Scandic Hotels Group, you can compare the effects of market volatilities on SBM Offshore and Scandic Hotels 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 SBM Offshore with a short position of Scandic Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Scandic Hotels.
Diversification Opportunities for SBM Offshore and Scandic Hotels
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between SBM and Scandic is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group and SBM 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 SBM Offshore NV are associated (or correlated) with Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of SBM Offshore i.e., SBM Offshore and Scandic Hotels go up and down completely randomly.
Pair Corralation between SBM Offshore and Scandic Hotels
Assuming the 90 days trading horizon SBM Offshore is expected to generate 1.98 times less return on investment than Scandic Hotels. But when comparing it to its historical volatility, SBM Offshore NV is 1.1 times less risky than Scandic Hotels. It trades about 0.05 of its potential returns per unit of risk. Scandic Hotels Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,453 in Scandic Hotels Group on September 3, 2024 and sell it today you would earn a total of 3,269 from holding Scandic Hotels Group or generate 94.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
SBM Offshore NV vs. Scandic Hotels Group
Performance |
| Timeline |
| SBM Offshore NV |
| Scandic Hotels Group |
SBM Offshore and Scandic Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Scandic Hotels
The main advantage of trading using opposite SBM Offshore and Scandic Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Scandic Hotels 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 Scandic Hotels will offset losses from the drop in Scandic Hotels' long position.| SBM Offshore vs. Zoom Video Communications | SBM Offshore vs. Enbridge | SBM Offshore vs. Endo International PLC | SBM Offshore vs. Invesco Health Care |
| Scandic Hotels vs. Sealed Air Corp | Scandic Hotels vs. Alaska Air Group | Scandic Hotels vs. Charter Communications Cl | Scandic Hotels vs. Zegona Communications Plc |
Check out your portfolio center.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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