Correlation Between SBM Offshore and Ferrexpo PLC
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Ferrexpo PLC 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 Ferrexpo PLC 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 Ferrexpo PLC, you can compare the effects of market volatilities on SBM Offshore and Ferrexpo PLC 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 Ferrexpo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Ferrexpo PLC.
Diversification Opportunities for SBM Offshore and Ferrexpo PLC
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and Ferrexpo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Ferrexpo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrexpo 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 Ferrexpo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrexpo PLC has no effect on the direction of SBM Offshore i.e., SBM Offshore and Ferrexpo PLC go up and down completely randomly.
Pair Corralation between SBM Offshore and Ferrexpo PLC
Assuming the 90 days trading horizon SBM Offshore is expected to generate 2.52 times less return on investment than Ferrexpo PLC. But when comparing it to its historical volatility, SBM Offshore NV is 2.6 times less risky than Ferrexpo PLC. It trades about 0.11 of its potential returns per unit of risk. Ferrexpo PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,450 in Ferrexpo PLC on August 28, 2024 and sell it today you would earn a total of 3,260 from holding Ferrexpo PLC or generate 73.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.22% |
| Values | Daily Returns |
SBM Offshore NV vs. Ferrexpo PLC
Performance |
| Timeline |
| SBM Offshore NV |
| Ferrexpo PLC |
SBM Offshore and Ferrexpo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Ferrexpo PLC
The main advantage of trading using opposite SBM Offshore and Ferrexpo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Ferrexpo PLC 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 Ferrexpo PLC will offset losses from the drop in Ferrexpo PLC's long position.| SBM Offshore vs. PureTech Health plc | SBM Offshore vs. Dolly Varden Silver | SBM Offshore vs. Addtech | SBM Offshore vs. Anglesey Mining |
| Ferrexpo PLC vs. Spirent Communications plc | Ferrexpo PLC vs. SBM Offshore NV | Ferrexpo PLC vs. Eastman Chemical Co | Ferrexpo PLC vs. Charter Communications Cl |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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