Correlation Between Cairn Homes and SBM Offshore
Can any of the company-specific risk be diversified away by investing in both Cairn Homes 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 Cairn Homes and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cairn Homes PLC and SBM Offshore NV, you can compare the effects of market volatilities on Cairn Homes 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 Cairn Homes with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and SBM Offshore.
Diversification Opportunities for Cairn Homes and SBM Offshore
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cairn and SBM is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC 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 Cairn Homes 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 Cairn Homes PLC 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 Cairn Homes i.e., Cairn Homes and SBM Offshore go up and down completely randomly.
Pair Corralation between Cairn Homes and SBM Offshore
Assuming the 90 days trading horizon Cairn Homes PLC is expected to under-perform the SBM Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Cairn Homes PLC is 1.35 times less risky than SBM Offshore. The stock trades about -0.13 of its potential returns per unit of risk. The SBM Offshore NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,679 in SBM Offshore NV on September 1, 2024 and sell it today you would earn a total of 36.00 from holding SBM Offshore NV or generate 2.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cairn Homes PLC vs. SBM Offshore NV
Performance |
| Timeline |
| Cairn Homes PLC |
| SBM Offshore NV |
Cairn Homes and SBM Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and SBM Offshore
The main advantage of trading using opposite Cairn Homes and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes 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.| Cairn Homes vs. Rightmove PLC | Cairn Homes vs. Bioventix | Cairn Homes vs. VeriSign | Cairn Homes vs. Games Workshop Group |
| SBM Offshore vs. Bankers Investment Trust | SBM Offshore vs. Elmos Semiconductor SE | SBM Offshore vs. Beeks Trading | SBM Offshore vs. Tatton Asset Management |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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