Correlation Between SBM OFFSHORE and LEGACY IRON
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and LEGACY IRON 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 LEGACY IRON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM OFFSHORE and LEGACY IRON ORE, you can compare the effects of market volatilities on SBM OFFSHORE and LEGACY IRON 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 LEGACY IRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and LEGACY IRON.
Diversification Opportunities for SBM OFFSHORE and LEGACY IRON
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SBM and LEGACY is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and LEGACY IRON ORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGACY IRON ORE 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 LEGACY IRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGACY IRON ORE has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and LEGACY IRON go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and LEGACY IRON
Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 3.3 times more return on investment than LEGACY IRON. However, SBM OFFSHORE is 3.3 times more volatile than LEGACY IRON ORE. It trades about 0.04 of its potential returns per unit of risk. LEGACY IRON ORE is currently generating about -0.06 per unit of risk. If you would invest 1,371 in SBM OFFSHORE on August 25, 2024 and sell it today you would earn a total of 429.00 from holding SBM OFFSHORE or generate 31.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
SBM OFFSHORE vs. LEGACY IRON ORE
Performance |
| Timeline |
| SBM OFFSHORE |
| LEGACY IRON ORE |
SBM OFFSHORE and LEGACY IRON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM OFFSHORE and LEGACY IRON
The main advantage of trading using opposite SBM OFFSHORE and LEGACY IRON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, LEGACY IRON 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 LEGACY IRON will offset losses from the drop in LEGACY IRON's long position.| SBM OFFSHORE vs. Vulcan Materials | SBM OFFSHORE vs. Goodyear Tire Rubber | SBM OFFSHORE vs. Penn National Gaming | SBM OFFSHORE vs. THRACE PLASTICS |
| LEGACY IRON vs. Insteel Industries | LEGACY IRON vs. Boiron SA | LEGACY IRON vs. SBM OFFSHORE | LEGACY IRON vs. Nippon Steel |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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