Correlation Between SBM Offshore and Alaska Air
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Alaska Air 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 Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM Offshore NV and Alaska Air Group, you can compare the effects of market volatilities on SBM Offshore and Alaska Air 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 Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Alaska Air.
Diversification Opportunities for SBM Offshore and Alaska Air
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and Alaska is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Alaska Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group 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 NV are associated (or correlated) with Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group has no effect on the direction of SBM Offshore i.e., SBM Offshore and Alaska Air go up and down completely randomly.
Pair Corralation between SBM Offshore and Alaska Air
Assuming the 90 days horizon SBM Offshore NV is expected to generate 1.15 times more return on investment than Alaska Air. However, SBM Offshore is 1.15 times more volatile than Alaska Air Group. It trades about 0.06 of its potential returns per unit of risk. Alaska Air Group is currently generating about 0.02 per unit of risk. If you would invest 1,435 in SBM Offshore NV on September 2, 2024 and sell it today you would earn a total of 445.00 from holding SBM Offshore NV or generate 31.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 63.17% |
| Values | Daily Returns |
SBM Offshore NV vs. Alaska Air Group
Performance |
| Timeline |
| SBM Offshore NV |
| Alaska Air Group |
SBM Offshore and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Alaska Air
The main advantage of trading using opposite SBM Offshore and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Alaska Air 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 Alaska Air will offset losses from the drop in Alaska Air's long position.| SBM Offshore vs. Expro Group Holdings | SBM Offshore vs. ChampionX | SBM Offshore vs. Ranger Energy Services | SBM Offshore vs. Cactus Inc |
| Alaska Air vs. Canadian Pacific Railway | Alaska Air vs. Werner Enterprises | Alaska Air vs. Canadian National Railway | Alaska Air vs. CSX Corporation |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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