Correlation Between SBM OFFSHORE and Power Assets
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and Power Assets 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 Power Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM OFFSHORE and Power Assets Holdings, you can compare the effects of market volatilities on SBM OFFSHORE and Power Assets 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 Power Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and Power Assets.
Diversification Opportunities for SBM OFFSHORE and Power Assets
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SBM and Power is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings 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 Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and Power Assets go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and Power Assets
Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 1.55 times more return on investment than Power Assets. However, SBM OFFSHORE is 1.55 times more volatile than Power Assets Holdings. It trades about 0.11 of its potential returns per unit of risk. Power Assets Holdings is currently generating about -0.32 per unit of risk. If you would invest 1,700 in SBM OFFSHORE on November 7, 2024 and sell it today you would earn a total of 64.00 from holding SBM OFFSHORE or generate 3.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
SBM OFFSHORE vs. Power Assets Holdings
Performance |
| Timeline |
| SBM OFFSHORE |
| Power Assets Holdings |
SBM OFFSHORE and Power Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM OFFSHORE and Power Assets
The main advantage of trading using opposite SBM OFFSHORE and Power Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, Power Assets 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 Power Assets will offset losses from the drop in Power Assets' long position.| SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc |
| Power Assets vs. Schweizer Electronic AG | Power Assets vs. STORE ELECTRONIC | Power Assets vs. KIMBALL ELECTRONICS | Power Assets vs. STMICROELECTRONICS |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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