Correlation Between SBM Offshore and Global Lights
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Global Lights 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 Global Lights 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 Global Lights Acquisition, you can compare the effects of market volatilities on SBM Offshore and Global Lights 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 Global Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Global Lights.
Diversification Opportunities for SBM Offshore and Global Lights
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and Global is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Global Lights Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Lights Acquisition 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 Global Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Lights Acquisition has no effect on the direction of SBM Offshore i.e., SBM Offshore and Global Lights go up and down completely randomly.
Pair Corralation between SBM Offshore and Global Lights
Assuming the 90 days horizon SBM Offshore NV is expected to generate 4.66 times more return on investment than Global Lights. However, SBM Offshore is 4.66 times more volatile than Global Lights Acquisition. It trades about 0.08 of its potential returns per unit of risk. Global Lights Acquisition is currently generating about 0.07 per unit of risk. If you would invest 1,607 in SBM Offshore NV on September 3, 2024 and sell it today you would earn a total of 273.00 from holding SBM Offshore NV or generate 16.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM Offshore NV vs. Global Lights Acquisition
Performance |
| Timeline |
| SBM Offshore NV |
| Global Lights Acquisition |
SBM Offshore and Global Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Global Lights
The main advantage of trading using opposite SBM Offshore and Global Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Global Lights 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 Global Lights will offset losses from the drop in Global Lights' long position.| SBM Offshore vs. Expro Group Holdings | SBM Offshore vs. ChampionX | SBM Offshore vs. Ranger Energy Services | SBM Offshore vs. Cactus Inc |
| Global Lights vs. Anheuser Busch Inbev | Global Lights vs. Luxfer Holdings PLC | Global Lights vs. Molson Coors Brewing | Global Lights vs. RLX Technology |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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