Correlation Between Falcon Oil and SBM Offshore
Can any of the company-specific risk be diversified away by investing in both Falcon Oil 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 Falcon Oil and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Falcon Oil Gas and SBM Offshore NV, you can compare the effects of market volatilities on Falcon Oil 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 Falcon Oil with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Oil and SBM Offshore.
Diversification Opportunities for Falcon Oil and SBM Offshore
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Falcon and SBM is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Oil Gas 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 Falcon Oil 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 Falcon Oil Gas 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 Falcon Oil i.e., Falcon Oil and SBM Offshore go up and down completely randomly.
Pair Corralation between Falcon Oil and SBM Offshore
Assuming the 90 days trading horizon Falcon Oil Gas is expected to under-perform the SBM Offshore. In addition to that, Falcon Oil is 1.09 times more volatile than SBM Offshore NV. It trades about -0.19 of its total potential returns per unit of risk. SBM Offshore NV is currently generating about 0.15 per unit of volatility. If you would invest 1,654 in SBM Offshore NV on August 27, 2024 and sell it today you would earn a total of 106.00 from holding SBM Offshore NV or generate 6.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Falcon Oil Gas vs. SBM Offshore NV
Performance |
| Timeline |
| Falcon Oil Gas |
| SBM Offshore NV |
Falcon Oil and SBM Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falcon Oil and SBM Offshore
The main advantage of trading using opposite Falcon Oil and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Oil 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.| Falcon Oil vs. Zoom Video Communications | Falcon Oil vs. Enbridge | Falcon Oil vs. Endo International PLC |
| SBM Offshore vs. Zoom Video Communications | SBM Offshore vs. Enbridge | SBM Offshore vs. Endo International PLC | SBM Offshore vs. Diversified Energy |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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