Correlation Between SBM Offshore and BW Offshore
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and BW 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 SBM Offshore and BW Offshore 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 BW Offshore, you can compare the effects of market volatilities on SBM Offshore and BW 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 SBM Offshore with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and BW Offshore.
Diversification Opportunities for SBM Offshore and BW Offshore
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SBM and 0RKH is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore has no effect on the direction of SBM Offshore i.e., SBM Offshore and BW Offshore go up and down completely randomly.
Pair Corralation between SBM Offshore and BW Offshore
Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 0.71 times more return on investment than BW Offshore. However, SBM Offshore NV is 1.41 times less risky than BW Offshore. It trades about 0.15 of its potential returns per unit of risk. BW Offshore is currently generating about -0.08 per unit of risk. If you would invest 1,654 in SBM Offshore NV on August 28, 2024 and sell it today you would earn a total of 106.00 from holding SBM Offshore NV or generate 6.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM Offshore NV vs. BW Offshore
Performance |
| Timeline |
| SBM Offshore NV |
| BW Offshore |
SBM Offshore and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and BW Offshore
The main advantage of trading using opposite SBM Offshore and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, BW 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 BW Offshore will offset losses from the drop in BW Offshore's long position.| SBM Offshore vs. Zoom Video Communications | SBM Offshore vs. Enbridge | SBM Offshore vs. Endo International PLC | SBM Offshore vs. Diversified Energy |
| BW Offshore vs. Samsung Electronics Co | BW Offshore vs. Samsung Electronics Co | BW Offshore vs. Hyundai Motor | BW Offshore vs. Toyota Motor Corp |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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