Correlation Between SBM OFFSHORE and LG Electronics
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and LG Electronics 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 LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM OFFSHORE and LG Electronics, you can compare the effects of market volatilities on SBM OFFSHORE and LG Electronics 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 LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and LG Electronics.
Diversification Opportunities for SBM OFFSHORE and LG Electronics
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SBM and LGLG is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics 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 LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and LG Electronics go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and LG Electronics
Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 0.72 times more return on investment than LG Electronics. However, SBM OFFSHORE is 1.39 times less risky than LG Electronics. It trades about 0.09 of its potential returns per unit of risk. LG Electronics is currently generating about 0.01 per unit of risk. If you would invest 1,391 in SBM OFFSHORE on September 3, 2024 and sell it today you would earn a total of 309.00 from holding SBM OFFSHORE or generate 22.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM OFFSHORE vs. LG Electronics
Performance |
| Timeline |
| SBM OFFSHORE |
| LG Electronics |
SBM OFFSHORE and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM OFFSHORE and LG Electronics
The main advantage of trading using opposite SBM OFFSHORE and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, LG Electronics 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 LG Electronics will offset losses from the drop in LG Electronics' long position.| SBM OFFSHORE vs. TOTAL GABON | SBM OFFSHORE vs. Walgreens Boots Alliance | SBM OFFSHORE vs. Peak Resources Limited |
| LG Electronics vs. Eidesvik Offshore ASA | LG Electronics vs. SK TELECOM TDADR | LG Electronics vs. Solstad Offshore ASA | LG Electronics vs. SBM OFFSHORE |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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