Correlation Between IShares SP and SBM Offshore
Can any of the company-specific risk be diversified away by investing in both IShares SP and SBM Offshore 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 IShares SP and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 500 and SBM Offshore NV, you can compare the effects of market volatilities on IShares SP and SBM Offshore 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 IShares SP with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and SBM Offshore.
Diversification Opportunities for IShares SP and SBM Offshore
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and SBM is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV and IShares SP 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 iShares SP 500 are associated (or correlated) with SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of IShares SP i.e., IShares SP and SBM Offshore go up and down completely randomly.
Pair Corralation between IShares SP and SBM Offshore
Assuming the 90 days trading horizon IShares SP is expected to generate 5.63 times less return on investment than SBM Offshore. But when comparing it to its historical volatility, iShares SP 500 is 2.12 times less risky than SBM Offshore. It trades about 0.01 of its potential returns per unit of risk. SBM Offshore NV is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,334 in SBM Offshore NV on August 30, 2024 and sell it today you would earn a total of 378.00 from holding SBM Offshore NV or generate 28.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 500 vs. SBM Offshore NV
Performance |
| Timeline |
| iShares SP 500 |
| SBM Offshore NV |
IShares SP and SBM Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and SBM Offshore
The main advantage of trading using opposite IShares SP and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, SBM Offshore 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 SBM Offshore will offset losses from the drop in SBM Offshore's long position.The idea behind iShares SP 500 and SBM Offshore NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SBM Offshore vs. Fugro NV | SBM Offshore vs. Koninklijke Vopak NV | SBM Offshore vs. Randstad NV | SBM Offshore vs. Aalberts Industries NV |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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