Correlation Between SBM OFFSHORE and W R
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and W R 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 W R into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM OFFSHORE and W R Berkley, you can compare the effects of market volatilities on SBM OFFSHORE and W R 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 W R. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and W R.
Diversification Opportunities for SBM OFFSHORE and W R
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and WR1 is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and W R Berkley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on W R Berkley 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 W R. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of W R Berkley has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and W R go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and W R
Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 1.19 times less return on investment than W R. In addition to that, SBM OFFSHORE is 1.07 times more volatile than W R Berkley. It trades about 0.04 of its total potential returns per unit of risk. W R Berkley is currently generating about 0.05 per unit of volatility. If you would invest 4,445 in W R Berkley on September 4, 2024 and sell it today you would earn a total of 1,575 from holding W R Berkley or generate 35.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM OFFSHORE vs. W R Berkley
Performance |
| Timeline |
| SBM OFFSHORE |
| W R Berkley |
SBM OFFSHORE and W R Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM OFFSHORE and W R
The main advantage of trading using opposite SBM OFFSHORE and W R positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, W R 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 W R will offset losses from the drop in W R's long position.| SBM OFFSHORE vs. TOTAL GABON | SBM OFFSHORE vs. Walgreens Boots Alliance | SBM OFFSHORE vs. Peak Resources Limited |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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