Correlation Between SBM OFFSHORE and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and Iridium Communications 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 SBM OFFSHORE and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM OFFSHORE and Iridium Communications, you can compare the effects of market volatilities on SBM OFFSHORE and Iridium Communications 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 SBM OFFSHORE with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and Iridium Communications.
Diversification Opportunities for SBM OFFSHORE and Iridium Communications
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SBM and Iridium is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and SBM OFFSHORE 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 SBM OFFSHORE are associated (or correlated) with Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and Iridium Communications go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and Iridium Communications
Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 0.79 times more return on investment than Iridium Communications. However, SBM OFFSHORE is 1.27 times less risky than Iridium Communications. It trades about 0.11 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.15 per unit of risk. If you would invest 1,698 in SBM OFFSHORE on November 4, 2024 and sell it today you would earn a total of 66.00 from holding SBM OFFSHORE or generate 3.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM OFFSHORE vs. Iridium Communications
Performance |
| Timeline |
| SBM OFFSHORE |
| Iridium Communications |
SBM OFFSHORE and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM OFFSHORE and Iridium Communications
The main advantage of trading using opposite SBM OFFSHORE and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| SBM OFFSHORE vs. Mitsui Chemicals | SBM OFFSHORE vs. Tencent Music Entertainment | SBM OFFSHORE vs. MAVEN WIRELESS SWEDEN | SBM OFFSHORE vs. Tower One Wireless |
| Iridium Communications vs. Tradeweb Markets | Iridium Communications vs. FLOW TRADERS LTD | Iridium Communications vs. TRADEGATE | Iridium Communications vs. Ebro Foods SA |
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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