Correlation Between SBM Offshore and Mercantile Investment
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Mercantile Investment 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 Mercantile Investment 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 The Mercantile Investment, you can compare the effects of market volatilities on SBM Offshore and Mercantile Investment 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 Mercantile Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Mercantile Investment.
Diversification Opportunities for SBM Offshore and Mercantile Investment
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SBM and Mercantile is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and The Mercantile Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Mercantile Investment 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 Mercantile Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Mercantile Investment has no effect on the direction of SBM Offshore i.e., SBM Offshore and Mercantile Investment go up and down completely randomly.
Pair Corralation between SBM Offshore and Mercantile Investment
Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 2.02 times more return on investment than Mercantile Investment. However, SBM Offshore is 2.02 times more volatile than The Mercantile Investment. It trades about 0.06 of its potential returns per unit of risk. The Mercantile Investment is currently generating about -0.02 per unit of risk. If you would invest 1,676 in SBM Offshore NV on August 31, 2024 and sell it today you would earn a total of 37.00 from holding SBM Offshore NV or generate 2.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM Offshore NV vs. The Mercantile Investment
Performance |
| Timeline |
| SBM Offshore NV |
| The Mercantile Investment |
SBM Offshore and Mercantile Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Mercantile Investment
The main advantage of trading using opposite SBM Offshore and Mercantile Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Mercantile Investment 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 Mercantile Investment will offset losses from the drop in Mercantile Investment's long position.| SBM Offshore vs. AcadeMedia AB | SBM Offshore vs. Zinc Media Group | SBM Offshore vs. Auction Technology Group | SBM Offshore vs. Hollywood Bowl Group |
| Mercantile Investment vs. Samsung Electronics Co | Mercantile Investment vs. Samsung Electronics Co | Mercantile Investment vs. Hyundai Motor | Mercantile Investment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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