Correlation Between Sembcorp Marine and Thales SA
Can any of the company-specific risk be diversified away by investing in both Sembcorp Marine and Thales SA 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 Sembcorp Marine and Thales SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sembcorp Marine and Thales SA, you can compare the effects of market volatilities on Sembcorp Marine and Thales SA 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 Sembcorp Marine with a short position of Thales SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sembcorp Marine and Thales SA.
Diversification Opportunities for Sembcorp Marine and Thales SA
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sembcorp and Thales is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sembcorp Marine and Thales SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA and Sembcorp Marine 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 Sembcorp Marine are associated (or correlated) with Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA has no effect on the direction of Sembcorp Marine i.e., Sembcorp Marine and Thales SA go up and down completely randomly.
Pair Corralation between Sembcorp Marine and Thales SA
Assuming the 90 days horizon Sembcorp Marine is expected to generate 4.72 times more return on investment than Thales SA. However, Sembcorp Marine is 4.72 times more volatile than Thales SA. It trades about -0.01 of its potential returns per unit of risk. Thales SA is currently generating about -0.42 per unit of risk. If you would invest 155.00 in Sembcorp Marine on September 1, 2024 and sell it today you would lose (8.00) from holding Sembcorp Marine or give up 5.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sembcorp Marine vs. Thales SA
Performance |
| Timeline |
| Sembcorp Marine |
| Thales SA |
Sembcorp Marine and Thales SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sembcorp Marine and Thales SA
The main advantage of trading using opposite Sembcorp Marine and Thales SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sembcorp Marine position performs unexpectedly, Thales SA 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 Thales SA will offset losses from the drop in Thales SA's long position.| Sembcorp Marine vs. Austal Limited | Sembcorp Marine vs. Rolls Royce Holdings PLC | Sembcorp Marine vs. AAR Corp | Sembcorp Marine vs. Eve Holding |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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