Correlation Between SBM Offshore and NL Industries
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and NL 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 NL 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 NL Industries, you can compare the effects of market volatilities on SBM Offshore and NL 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and NL Industries.
Diversification Opportunities for SBM Offshore and NL Industries
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SBM and NL Industries is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of SBM Offshore i.e., SBM Offshore and NL Industries go up and down completely randomly.
Pair Corralation between SBM Offshore and NL Industries
Assuming the 90 days horizon SBM Offshore is expected to generate 3.43 times less return on investment than NL Industries. But when comparing it to its historical volatility, SBM Offshore NV is 4.45 times less risky than NL Industries. It trades about 0.14 of its potential returns per unit of risk. NL Industries is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 741.00 in NL Industries on September 1, 2024 and sell it today you would earn a total of 54.00 from holding NL Industries or generate 7.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM Offshore NV vs. NL Industries
Performance |
| Timeline |
| SBM Offshore NV |
| NL Industries |
SBM Offshore and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and NL Industries
The main advantage of trading using opposite SBM Offshore and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, NL 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 NL Industries will offset losses from the drop in NL Industries' long position.| SBM Offshore vs. Expro Group Holdings | SBM Offshore vs. ChampionX | SBM Offshore vs. Ranger Energy Services | SBM Offshore vs. Cactus Inc |
| NL Industries vs. Atos SE | NL Industries vs. Deveron Corp | NL Industries vs. Appen Limited | NL Industries vs. Atos Origin SA |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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