Correlation Between Litigation Capital and SBM Offshore
Can any of the company-specific risk be diversified away by investing in both Litigation Capital 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 Litigation Capital and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Litigation Capital Management and SBM Offshore NV, you can compare the effects of market volatilities on Litigation Capital 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 Litigation Capital with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litigation Capital and SBM Offshore.
Diversification Opportunities for Litigation Capital and SBM Offshore
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Litigation and SBM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Litigation Capital Management 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 Litigation Capital 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 Litigation Capital Management 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 Litigation Capital i.e., Litigation Capital and SBM Offshore go up and down completely randomly.
Pair Corralation between Litigation Capital and SBM Offshore
Assuming the 90 days trading horizon Litigation Capital Management is expected to under-perform the SBM Offshore. In addition to that, Litigation Capital is 1.85 times more volatile than SBM Offshore NV. It trades about -0.34 of its total potential returns per unit of risk. SBM Offshore NV is currently generating about -0.34 per unit of volatility. If you would invest 1,779 in SBM Offshore NV on September 20, 2024 and sell it today you would lose (133.00) from holding SBM Offshore NV or give up 7.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Litigation Capital Management vs. SBM Offshore NV
Performance |
| Timeline |
| Litigation Capital |
| SBM Offshore NV |
Litigation Capital and SBM Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Litigation Capital and SBM Offshore
The main advantage of trading using opposite Litigation Capital and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Litigation Capital 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.| Litigation Capital vs. Southern Copper Corp | Litigation Capital vs. URU Metals | Litigation Capital vs. Panther Metals PLC | Litigation Capital vs. Wheaton Precious Metals |
| SBM Offshore vs. Zoom Video Communications | SBM Offshore vs. Enbridge | SBM Offshore vs. Endo International PLC | SBM Offshore vs. Blue Star Capital |
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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