Correlation Between SBM Offshore and Universal Music
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Universal Music 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 Universal Music 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 Universal Music Group, you can compare the effects of market volatilities on SBM Offshore and Universal Music 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 Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Universal Music.
Diversification Opportunities for SBM Offshore and Universal Music
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between SBM and Universal is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group 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 Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of SBM Offshore i.e., SBM Offshore and Universal Music go up and down completely randomly.
Pair Corralation between SBM Offshore and Universal Music
Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 0.8 times more return on investment than Universal Music. However, SBM Offshore NV is 1.26 times less risky than Universal Music. It trades about 0.08 of its potential returns per unit of risk. Universal Music Group is currently generating about -0.05 per unit of risk. If you would invest 1,417 in SBM Offshore NV on September 3, 2024 and sell it today you would earn a total of 295.00 from holding SBM Offshore NV or generate 20.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM Offshore NV vs. Universal Music Group
Performance |
| Timeline |
| SBM Offshore NV |
| Universal Music Group |
SBM Offshore and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Universal Music
The main advantage of trading using opposite SBM Offshore and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Universal Music 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 Universal Music will offset losses from the drop in Universal Music'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 |
| Universal Music vs. Vivendi SA | Universal Music vs. Prosus NV | Universal Music vs. Pershing Square Holdings | Universal Music vs. Adyen 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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