Correlation Between SBM Offshore and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Diageo PLC 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 Diageo PLC 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 Diageo PLC ADR, you can compare the effects of market volatilities on SBM Offshore and Diageo PLC 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 Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Diageo PLC.
Diversification Opportunities for SBM Offshore and Diageo PLC
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SBM and Diageo is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR 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 Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC ADR has no effect on the direction of SBM Offshore i.e., SBM Offshore and Diageo PLC go up and down completely randomly.
Pair Corralation between SBM Offshore and Diageo PLC
Assuming the 90 days horizon SBM Offshore NV is expected to generate 1.94 times more return on investment than Diageo PLC. However, SBM Offshore is 1.94 times more volatile than Diageo PLC ADR. It trades about 0.06 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.05 per unit of risk. If you would invest 1,435 in SBM Offshore NV on August 31, 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 Against |
| Strength | Weak |
| Accuracy | 63.1% |
| Values | Daily Returns |
SBM Offshore NV vs. Diageo PLC ADR
Performance |
| Timeline |
| SBM Offshore NV |
| Diageo PLC ADR |
SBM Offshore and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Diageo PLC
The main advantage of trading using opposite SBM Offshore and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Diageo PLC 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 Diageo PLC will offset losses from the drop in Diageo PLC's long position.| SBM Offshore vs. Expro Group Holdings | SBM Offshore vs. ChampionX | SBM Offshore vs. Ranger Energy Services | SBM Offshore vs. Cactus Inc |
| Diageo PLC vs. Naked Wines plc | Diageo PLC vs. Andrew Peller Limited | Diageo PLC vs. Iconic Brands | Diageo PLC vs. Naked Wines plc |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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