Correlation Between SBM Offshore and TKH Group
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and TKH Group 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 TKH Group 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 TKH Group NV, you can compare the effects of market volatilities on SBM Offshore and TKH Group 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 TKH Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and TKH Group.
Diversification Opportunities for SBM Offshore and TKH Group
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SBM and TKH is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and TKH Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TKH Group NV 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 TKH Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TKH Group NV has no effect on the direction of SBM Offshore i.e., SBM Offshore and TKH Group go up and down completely randomly.
Pair Corralation between SBM Offshore and TKH Group
Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 3.25 times more return on investment than TKH Group. However, SBM Offshore is 3.25 times more volatile than TKH Group NV. It trades about 0.19 of its potential returns per unit of risk. TKH Group NV is currently generating about 0.45 per unit of risk. If you would invest 1,772 in SBM Offshore NV on November 29, 2024 and sell it today you would earn a total of 222.00 from holding SBM Offshore NV or generate 12.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM Offshore NV vs. TKH Group NV
Performance |
| Timeline |
| SBM Offshore NV |
| TKH Group NV |
SBM Offshore and TKH Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and TKH Group
The main advantage of trading using opposite SBM Offshore and TKH Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, TKH Group 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 TKH Group will offset losses from the drop in TKH Group's long position.| SBM Offshore vs. Fugro NV | SBM Offshore vs. Koninklijke Vopak NV | SBM Offshore vs. Randstad NV | SBM Offshore vs. Aalberts Industries NV |
| TKH Group vs. Aalberts Industries NV | TKH Group vs. BE Semiconductor Industries | TKH Group vs. AMG Advanced Metallurgical | TKH Group vs. Koninklijke Vopak NV |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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