Correlation Between SBM Offshore and Metals Exploration
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Metals Exploration 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 Metals Exploration 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 Metals Exploration Plc, you can compare the effects of market volatilities on SBM Offshore and Metals Exploration 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 Metals Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Metals Exploration.
Diversification Opportunities for SBM Offshore and Metals Exploration
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SBM and Metals is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Metals Exploration Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Exploration 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 Metals Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Exploration Plc has no effect on the direction of SBM Offshore i.e., SBM Offshore and Metals Exploration go up and down completely randomly.
Pair Corralation between SBM Offshore and Metals Exploration
Assuming the 90 days trading horizon SBM Offshore is expected to generate 1.77 times less return on investment than Metals Exploration. But when comparing it to its historical volatility, SBM Offshore NV is 1.7 times less risky than Metals Exploration. It trades about 0.1 of its potential returns per unit of risk. Metals Exploration Plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 400.00 in Metals Exploration Plc on August 29, 2024 and sell it today you would earn a total of 185.00 from holding Metals Exploration Plc or generate 46.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
SBM Offshore NV vs. Metals Exploration Plc
Performance |
| Timeline |
| SBM Offshore NV |
| Metals Exploration Plc |
SBM Offshore and Metals Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Metals Exploration
The main advantage of trading using opposite SBM Offshore and Metals Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Metals Exploration 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 Metals Exploration will offset losses from the drop in Metals Exploration's long position.| SBM Offshore vs. MyHealthChecked Plc | SBM Offshore vs. Eco Animal Health | SBM Offshore vs. X FAB Silicon Foundries | SBM Offshore vs. Datalogic |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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