Correlation Between Austal and Sembcorp Marine
Can any of the company-specific risk be diversified away by investing in both Austal and Sembcorp Marine 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 Austal and Sembcorp Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Austal Limited and Sembcorp Marine, you can compare the effects of market volatilities on Austal and Sembcorp Marine 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 Austal with a short position of Sembcorp Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austal and Sembcorp Marine.
Diversification Opportunities for Austal and Sembcorp Marine
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Austal and Sembcorp is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Austal Limited and Sembcorp Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sembcorp Marine and Austal 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 Austal Limited are associated (or correlated) with Sembcorp Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sembcorp Marine has no effect on the direction of Austal i.e., Austal and Sembcorp Marine go up and down completely randomly.
Pair Corralation between Austal and Sembcorp Marine
Assuming the 90 days horizon Austal is expected to generate 1.23 times less return on investment than Sembcorp Marine. But when comparing it to its historical volatility, Austal Limited is 2.08 times less risky than Sembcorp Marine. It trades about 0.07 of its potential returns per unit of risk. Sembcorp Marine is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 130.00 in Sembcorp Marine on August 25, 2024 and sell it today you would earn a total of 10.00 from holding Sembcorp Marine or generate 7.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.79% |
| Values | Daily Returns |
Austal Limited vs. Sembcorp Marine
Performance |
| Timeline |
| Austal Limited |
| Sembcorp Marine |
Austal and Sembcorp Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Austal and Sembcorp Marine
The main advantage of trading using opposite Austal and Sembcorp Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austal position performs unexpectedly, Sembcorp Marine 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 Sembcorp Marine will offset losses from the drop in Sembcorp Marine's long position.| Austal vs. 808 Renewable Energy | Austal vs. Sky Harbour Group | Austal vs. VirTra Inc | Austal vs. Firan Technology Group |
| Sembcorp Marine vs. Austal Limited | Sembcorp Marine vs. Rolls Royce Holdings PLC | Sembcorp Marine vs. AAR Corp | Sembcorp Marine vs. Eve Holding |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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