Correlation Between SBM OFFSHORE and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and Spirent 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 Spirent 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 Spirent Communications plc, you can compare the effects of market volatilities on SBM OFFSHORE and Spirent 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 Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and Spirent Communications.
Diversification Opportunities for SBM OFFSHORE and Spirent Communications
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SBM and Spirent is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent 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 Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and Spirent Communications go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and Spirent Communications
Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 0.38 times more return on investment than Spirent Communications. However, SBM OFFSHORE is 2.66 times less risky than Spirent Communications. It trades about 0.33 of its potential returns per unit of risk. Spirent Communications plc is currently generating about -0.1 per unit of risk. If you would invest 1,665 in SBM OFFSHORE on October 26, 2024 and sell it today you would earn a total of 146.00 from holding SBM OFFSHORE or generate 8.77% 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. Spirent Communications plc
Performance |
Timeline |
SBM OFFSHORE |
Spirent Communications |
SBM OFFSHORE and Spirent Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SBM OFFSHORE and Spirent Communications
The main advantage of trading using opposite SBM OFFSHORE and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, Spirent 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 Spirent Communications will offset losses from the drop in Spirent Communications' long position.SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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