Correlation Between SBM OFFSHORE and Entravision Communications
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and Entravision 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 Entravision 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 Entravision Communications, you can compare the effects of market volatilities on SBM OFFSHORE and Entravision 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 Entravision Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and Entravision Communications.
Diversification Opportunities for SBM OFFSHORE and Entravision Communications
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and Entravision is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision 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 Entravision Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entravision Communications has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and Entravision Communications go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and Entravision Communications
Assuming the 90 days trading horizon SBM OFFSHORE is expected to under-perform the Entravision Communications. But the stock apears to be less risky and, when comparing its historical volatility, SBM OFFSHORE is 1.73 times less risky than Entravision Communications. The stock trades about -0.1 of its potential returns per unit of risk. The Entravision Communications is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 228.00 in Entravision Communications on September 12, 2024 and sell it today you would earn a total of 10.00 from holding Entravision Communications or generate 4.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
SBM OFFSHORE vs. Entravision Communications
Performance |
| Timeline |
| SBM OFFSHORE |
| Entravision Communications |
SBM OFFSHORE and Entravision Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM OFFSHORE and Entravision Communications
The main advantage of trading using opposite SBM OFFSHORE and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, Entravision 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 Entravision Communications will offset losses from the drop in Entravision Communications' long position.| SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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