Correlation Between SBM Offshore and Luxfer Holdings
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Luxfer Holdings 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 Luxfer Holdings 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 Luxfer Holdings PLC, you can compare the effects of market volatilities on SBM Offshore and Luxfer Holdings 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 Luxfer Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Luxfer Holdings.
Diversification Opportunities for SBM Offshore and Luxfer Holdings
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and Luxfer is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC 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 Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of SBM Offshore i.e., SBM Offshore and Luxfer Holdings go up and down completely randomly.
Pair Corralation between SBM Offshore and Luxfer Holdings
Assuming the 90 days horizon SBM Offshore is expected to generate 1.34 times less return on investment than Luxfer Holdings. But when comparing it to its historical volatility, SBM Offshore NV is 1.47 times less risky than Luxfer Holdings. It trades about 0.08 of its potential returns per unit of risk. Luxfer Holdings PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,183 in Luxfer Holdings PLC on September 1, 2024 and sell it today you would earn a total of 253.00 from holding Luxfer Holdings PLC or generate 21.39% 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. Luxfer Holdings PLC
Performance |
| Timeline |
| SBM Offshore NV |
| Luxfer Holdings PLC |
SBM Offshore and Luxfer Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Luxfer Holdings
The main advantage of trading using opposite SBM Offshore and Luxfer Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Luxfer Holdings 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 Luxfer Holdings will offset losses from the drop in Luxfer Holdings' long position.| SBM Offshore vs. Expro Group Holdings | SBM Offshore vs. ChampionX | SBM Offshore vs. Ranger Energy Services | SBM Offshore vs. Cactus Inc |
| Luxfer Holdings vs. Graham | Luxfer Holdings vs. Enerpac Tool Group | Luxfer Holdings vs. Kadant Inc | Luxfer Holdings vs. Omega Flex |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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