Correlation Between SBM Offshore and Capricorn Energy

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Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Capricorn Energy 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 Capricorn Energy 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 Capricorn Energy PLC, you can compare the effects of market volatilities on SBM Offshore and Capricorn Energy 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 Capricorn Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Capricorn Energy.

Diversification Opportunities for SBM Offshore and Capricorn Energy

SBMCapricornDiversified AwaySBMCapricornDiversified Away100%
0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between SBM and Capricorn is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Capricorn Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricorn Energy PLC 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 Capricorn Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricorn Energy PLC has no effect on the direction of SBM Offshore i.e., SBM Offshore and Capricorn Energy go up and down completely randomly.

Pair Corralation between SBM Offshore and Capricorn Energy

Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 1.18 times more return on investment than Capricorn Energy. However, SBM Offshore is 1.18 times more volatile than Capricorn Energy PLC. It trades about 0.23 of its potential returns per unit of risk. Capricorn Energy PLC is currently generating about -0.18 per unit of risk. If you would invest  1,801  in SBM Offshore NV on November 25, 2024 and sell it today you would earn a total of  276.00  from holding SBM Offshore NV or generate 15.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

SBM Offshore NV  vs.  Capricorn Energy PLC

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 01020304050
JavaScript chart by amCharts 3.21.150NIS CNE
       Timeline  
SBM Offshore NV 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, SBM Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1718192021
Capricorn Energy PLC 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Capricorn Energy PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Capricorn Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb220240260280300320340

SBM Offshore and Capricorn Energy Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.59-4.93-3.28-1.630.02761.73.465.236.998.75 0.020.030.040.050.060.070.08
JavaScript chart by amCharts 3.21.150NIS CNE
       Returns  

Pair Trading with SBM Offshore and Capricorn Energy

The main advantage of trading using opposite SBM Offshore and Capricorn Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Capricorn Energy 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 Capricorn Energy will offset losses from the drop in Capricorn Energy's long position.
The idea behind SBM Offshore NV and Capricorn Energy PLC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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