Correlation Between SBM Offshore and Ao World
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Ao World 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 Ao World 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 Ao World, you can compare the effects of market volatilities on SBM Offshore and Ao World 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 Ao World. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Ao World.
Diversification Opportunities for SBM Offshore and Ao World
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SBM and Ao World is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Ao World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ao World 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 Ao World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ao World has no effect on the direction of SBM Offshore i.e., SBM Offshore and Ao World go up and down completely randomly.
Pair Corralation between SBM Offshore and Ao World
Assuming the 90 days trading horizon SBM Offshore NV is expected to under-perform the Ao World. In addition to that, SBM Offshore is 1.61 times more volatile than Ao World. It trades about -0.06 of its total potential returns per unit of risk. Ao World is currently generating about 0.17 per unit of volatility. If you would invest 10,380 in Ao World on September 14, 2024 and sell it today you would earn a total of 480.00 from holding Ao World or generate 4.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM Offshore NV vs. Ao World
Performance |
| Timeline |
| SBM Offshore NV |
| Ao World |
SBM Offshore and Ao World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Ao World
The main advantage of trading using opposite SBM Offshore and Ao World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Ao World 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 Ao World will offset losses from the drop in Ao World's long position.| SBM Offshore vs. Made Tech Group | SBM Offshore vs. Roper Technologies | SBM Offshore vs. LPKF Laser Electronics | SBM Offshore vs. Electronic Arts |
| Ao World vs. Batm Advanced Communications | Ao World vs. Spire Healthcare Group | Ao World vs. Induction Healthcare Group | Ao World vs. Cars Inc |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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