Correlation Between NL Industries and SBM Offshore
Can any of the company-specific risk be diversified away by investing in both NL Industries 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 NL Industries and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and SBM Offshore NV, you can compare the effects of market volatilities on NL Industries 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 NL Industries with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and SBM Offshore.
Diversification Opportunities for NL Industries and SBM Offshore
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NL Industries and SBM is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries 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 NL Industries 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 NL Industries 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 NL Industries i.e., NL Industries and SBM Offshore go up and down completely randomly.
Pair Corralation between NL Industries and SBM Offshore
Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.61 times less return on investment than SBM Offshore. In addition to that, NL Industries is 4.8 times more volatile than SBM Offshore NV. It trades about 0.02 of its total potential returns per unit of risk. SBM Offshore NV is currently generating about 0.14 per unit of volatility. If you would invest 1,836 in SBM Offshore NV on August 29, 2024 and sell it today you would earn a total of 44.00 from holding SBM Offshore NV or generate 2.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
NL Industries vs. SBM Offshore NV
Performance |
| Timeline |
| NL Industries |
| SBM Offshore NV |
NL Industries and SBM Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and SBM Offshore
The main advantage of trading using opposite NL Industries and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries 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.| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
| SBM Offshore vs. Expro Group Holdings | SBM Offshore vs. ChampionX | SBM Offshore vs. Ranger Energy Services | SBM Offshore vs. Cactus 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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