Correlation Between SBM OFFSHORE and KENNAMETAL INC
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and KENNAMETAL INC 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 KENNAMETAL INC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM OFFSHORE and KENNAMETAL INC, you can compare the effects of market volatilities on SBM OFFSHORE and KENNAMETAL INC 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 KENNAMETAL INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and KENNAMETAL INC.
Diversification Opportunities for SBM OFFSHORE and KENNAMETAL INC
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and KENNAMETAL is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and KENNAMETAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KENNAMETAL INC 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 KENNAMETAL INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KENNAMETAL INC has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and KENNAMETAL INC go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and KENNAMETAL INC
Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 1.25 times more return on investment than KENNAMETAL INC. However, SBM OFFSHORE is 1.25 times more volatile than KENNAMETAL INC. It trades about -0.08 of its potential returns per unit of risk. KENNAMETAL INC is currently generating about -0.22 per unit of risk. If you would invest 1,766 in SBM OFFSHORE on September 13, 2024 and sell it today you would lose (63.00) from holding SBM OFFSHORE or give up 3.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM OFFSHORE vs. KENNAMETAL INC
Performance |
| Timeline |
| SBM OFFSHORE |
| KENNAMETAL INC |
SBM OFFSHORE and KENNAMETAL INC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM OFFSHORE and KENNAMETAL INC
The main advantage of trading using opposite SBM OFFSHORE and KENNAMETAL INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, KENNAMETAL INC 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 KENNAMETAL INC will offset losses from the drop in KENNAMETAL INC's long position.| SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc |
| KENNAMETAL INC vs. Apple Inc | KENNAMETAL INC vs. Apple Inc | KENNAMETAL INC vs. Apple Inc | KENNAMETAL INC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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