Correlation Between SBM Offshore and CF Industries
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and CF Industries 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 CF Industries 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 CF Industries Holdings, you can compare the effects of market volatilities on SBM Offshore and CF Industries 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 CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and CF Industries.
Diversification Opportunities for SBM Offshore and CF Industries
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between SBM and CF Industries is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings 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 CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of SBM Offshore i.e., SBM Offshore and CF Industries go up and down completely randomly.
Pair Corralation between SBM Offshore and CF Industries
Assuming the 90 days horizon SBM Offshore NV is expected to under-perform the CF Industries. But the pink sheet apears to be less risky and, when comparing its historical volatility, SBM Offshore NV is 1.15 times less risky than CF Industries. The pink sheet trades about -0.21 of its potential returns per unit of risk. The CF Industries Holdings is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 7,663 in CF Industries Holdings on January 13, 2025 and sell it today you would lose (463.00) from holding CF Industries Holdings or give up 6.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM Offshore NV vs. CF Industries Holdings
Performance |
| Timeline |
| SBM Offshore NV |
| CF Industries Holdings |
SBM Offshore and CF Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and CF Industries
The main advantage of trading using opposite SBM Offshore and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, CF Industries 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 CF Industries will offset losses from the drop in CF Industries' long position.| SBM Offshore vs. Expro Group Holdings | SBM Offshore vs. ChampionX | SBM Offshore vs. Ranger Energy Services | SBM Offshore vs. Cactus Inc |
| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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