Correlation Between SBM Offshore and Parker Hannifin
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Parker Hannifin 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 Parker Hannifin 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 Parker Hannifin, you can compare the effects of market volatilities on SBM Offshore and Parker Hannifin 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 Parker Hannifin. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Parker Hannifin.
Diversification Opportunities for SBM Offshore and Parker Hannifin
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and Parker is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin 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 Parker Hannifin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parker Hannifin has no effect on the direction of SBM Offshore i.e., SBM Offshore and Parker Hannifin go up and down completely randomly.
Pair Corralation between SBM Offshore and Parker Hannifin
Assuming the 90 days horizon SBM Offshore is expected to generate 4.73 times less return on investment than Parker Hannifin. But when comparing it to its historical volatility, SBM Offshore NV is 2.68 times less risky than Parker Hannifin. It trades about 0.14 of its potential returns per unit of risk. Parker Hannifin is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 62,363 in Parker Hannifin on August 30, 2024 and sell it today you would earn a total of 7,625 from holding Parker Hannifin or generate 12.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
SBM Offshore NV vs. Parker Hannifin
Performance |
| Timeline |
| SBM Offshore NV |
| Parker Hannifin |
SBM Offshore and Parker Hannifin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Parker Hannifin
The main advantage of trading using opposite SBM Offshore and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Parker Hannifin 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 Parker Hannifin will offset losses from the drop in Parker Hannifin's long position.| SBM Offshore vs. Expro Group Holdings | SBM Offshore vs. ChampionX | SBM Offshore vs. Ranger Energy Services | SBM Offshore vs. Cactus Inc |
| Parker Hannifin vs. Illinois Tool Works | Parker Hannifin vs. Pentair PLC | Parker Hannifin vs. Emerson Electric | Parker Hannifin vs. Smith AO |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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