Correlation Between Safran SA and Sembcorp Marine
Can any of the company-specific risk be diversified away by investing in both Safran SA and Sembcorp Marine 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 Safran SA and Sembcorp Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Safran SA and Sembcorp Marine, you can compare the effects of market volatilities on Safran SA and Sembcorp Marine 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 Safran SA with a short position of Sembcorp Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safran SA and Sembcorp Marine.
Diversification Opportunities for Safran SA and Sembcorp Marine
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Safran and Sembcorp is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Safran SA and Sembcorp Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sembcorp Marine and Safran SA 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 Safran SA are associated (or correlated) with Sembcorp Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sembcorp Marine has no effect on the direction of Safran SA i.e., Safran SA and Sembcorp Marine go up and down completely randomly.
Pair Corralation between Safran SA and Sembcorp Marine
Assuming the 90 days horizon Safran SA is expected to generate 3.88 times less return on investment than Sembcorp Marine. But when comparing it to its historical volatility, Safran SA is 2.51 times less risky than Sembcorp Marine. It trades about 0.06 of its potential returns per unit of risk. Sembcorp Marine is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 147.00 in Sembcorp Marine on November 3, 2024 and sell it today you would earn a total of 20.00 from holding Sembcorp Marine or generate 13.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 93.18% |
| Values | Daily Returns |
Safran SA vs. Sembcorp Marine
Performance |
| Timeline |
| Safran SA |
| Sembcorp Marine |
Safran SA and Sembcorp Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Safran SA and Sembcorp Marine
The main advantage of trading using opposite Safran SA and Sembcorp Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safran SA position performs unexpectedly, Sembcorp Marine 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 Sembcorp Marine will offset losses from the drop in Sembcorp Marine's long position.| Safran SA vs. Airbus Group NV | Safran SA vs. Moog Inc | Safran SA vs. BAE Systems PLC | Safran SA vs. Airbus Group SE |
| Sembcorp Marine vs. Austal Limited | Sembcorp Marine vs. Rolls Royce Holdings PLC | Sembcorp Marine vs. AAR Corp | Sembcorp Marine vs. Eve Holding |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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