Correlation Between Diversified Energy and SBM Offshore
Can any of the company-specific risk be diversified away by investing in both Diversified Energy 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 Diversified Energy and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diversified Energy and SBM Offshore NV, you can compare the effects of market volatilities on Diversified Energy 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 Diversified Energy with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Energy and SBM Offshore.
Diversification Opportunities for Diversified Energy and SBM Offshore
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diversified and SBM is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Energy 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 Diversified Energy 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 Diversified Energy 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 Diversified Energy i.e., Diversified Energy and SBM Offshore go up and down completely randomly.
Pair Corralation between Diversified Energy and SBM Offshore
Assuming the 90 days trading horizon Diversified Energy is expected to generate 45.65 times more return on investment than SBM Offshore. However, Diversified Energy is 45.65 times more volatile than SBM Offshore NV. It trades about 0.07 of its potential returns per unit of risk. SBM Offshore NV is currently generating about 0.04 per unit of risk. If you would invest 246,547 in Diversified Energy on August 24, 2024 and sell it today you would lose (118,247) from holding Diversified Energy or give up 47.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.4% |
| Values | Daily Returns |
Diversified Energy vs. SBM Offshore NV
Performance |
| Timeline |
| Diversified Energy |
| SBM Offshore NV |
Diversified Energy and SBM Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diversified Energy and SBM Offshore
The main advantage of trading using opposite Diversified Energy and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Energy 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.| Diversified Energy vs. Zoom Video Communications | Diversified Energy vs. Enbridge | Diversified Energy vs. Endo International PLC | Diversified Energy vs. Neometals |
| SBM Offshore vs. Oakley Capital Investments | SBM Offshore vs. GoldMining | SBM Offshore vs. Neometals | SBM Offshore vs. Wheaton Precious Metals |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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