Correlation Between Air Transport and SBM Offshore
Can any of the company-specific risk be diversified away by investing in both Air Transport and SBM Offshore 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 Air Transport and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and SBM Offshore NV, you can compare the effects of market volatilities on Air Transport and SBM Offshore 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 Air Transport with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and SBM Offshore.
Diversification Opportunities for Air Transport and SBM Offshore
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and SBM is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV and Air Transport 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 Air Transport Services are associated (or correlated) with SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of Air Transport i.e., Air Transport and SBM Offshore go up and down completely randomly.
Pair Corralation between Air Transport and SBM Offshore
Given the investment horizon of 90 days Air Transport Services is expected to generate 0.06 times more return on investment than SBM Offshore. However, Air Transport Services is 17.4 times less risky than SBM Offshore. It trades about 0.16 of its potential returns per unit of risk. SBM Offshore NV is currently generating about -0.21 per unit of risk. If you would invest 2,229 in Air Transport Services on January 5, 2025 and sell it today you would earn a total of 10.00 from holding Air Transport Services or generate 0.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. SBM Offshore NV
Performance |
| Timeline |
| Air Transport Services |
| SBM Offshore NV |
Air Transport and SBM Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and SBM Offshore
The main advantage of trading using opposite Air Transport and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport position performs unexpectedly, SBM Offshore 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 SBM Offshore will offset losses from the drop in SBM Offshore's long position.| Air Transport vs. Copa Holdings SA | Air Transport vs. SkyWest | Air Transport vs. Sun Country Airlines | Air Transport vs. Frontier Group Holdings |
| SBM Offshore vs. Expro Group Holdings | SBM Offshore vs. ChampionX | SBM Offshore vs. Ranger Energy Services | SBM Offshore vs. Cactus 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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