Correlation Between SBM OFFSHORE and TAL Education
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and TAL Education 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 TAL Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM OFFSHORE and TAL Education Group, you can compare the effects of market volatilities on SBM OFFSHORE and TAL Education 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 TAL Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and TAL Education.
Diversification Opportunities for SBM OFFSHORE and TAL Education
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SBM and TAL is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group 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 TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and TAL Education go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and TAL Education
Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 0.56 times more return on investment than TAL Education. However, SBM OFFSHORE is 1.77 times less risky than TAL Education. It trades about 0.05 of its potential returns per unit of risk. TAL Education Group is currently generating about -0.07 per unit of risk. If you would invest 1,672 in SBM OFFSHORE on September 2, 2024 and sell it today you would earn a total of 28.00 from holding SBM OFFSHORE or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM OFFSHORE vs. TAL Education Group
Performance |
| Timeline |
| SBM OFFSHORE |
| TAL Education Group |
SBM OFFSHORE and TAL Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM OFFSHORE and TAL Education
The main advantage of trading using opposite SBM OFFSHORE and TAL Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, TAL Education 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 TAL Education will offset losses from the drop in TAL Education's long position.| SBM OFFSHORE vs. Federal Agricultural Mortgage | SBM OFFSHORE vs. Corporate Office Properties | SBM OFFSHORE vs. Infrastrutture Wireless Italiane | SBM OFFSHORE vs. AUST AGRICULTURAL |
| TAL Education vs. Tradegate AG Wertpapierhandelsbank | TAL Education vs. Webster Financial | TAL Education vs. QBE Insurance Group | TAL Education vs. PKSHA TECHNOLOGY 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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