Correlation Between Subsea 7 and SeaBird Exploration
Can any of the company-specific risk be diversified away by investing in both Subsea 7 and SeaBird Exploration 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 Subsea 7 and SeaBird Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Subsea 7 SA and SeaBird Exploration Plc, you can compare the effects of market volatilities on Subsea 7 and SeaBird Exploration 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 Subsea 7 with a short position of SeaBird Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subsea 7 and SeaBird Exploration.
Diversification Opportunities for Subsea 7 and SeaBird Exploration
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Subsea and SeaBird is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Subsea 7 SA and SeaBird Exploration Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SeaBird Exploration Plc and Subsea 7 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 Subsea 7 SA are associated (or correlated) with SeaBird Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SeaBird Exploration Plc has no effect on the direction of Subsea 7 i.e., Subsea 7 and SeaBird Exploration go up and down completely randomly.
Pair Corralation between Subsea 7 and SeaBird Exploration
Assuming the 90 days trading horizon Subsea 7 is expected to generate 1.16 times less return on investment than SeaBird Exploration. But when comparing it to its historical volatility, Subsea 7 SA is 1.01 times less risky than SeaBird Exploration. It trades about 0.3 of its potential returns per unit of risk. SeaBird Exploration Plc is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 505.00 in SeaBird Exploration Plc on August 27, 2024 and sell it today you would earn a total of 55.00 from holding SeaBird Exploration Plc or generate 10.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Subsea 7 SA vs. SeaBird Exploration Plc
Performance |
| Timeline |
| Subsea 7 SA |
| SeaBird Exploration Plc |
Subsea 7 and SeaBird Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Subsea 7 and SeaBird Exploration
The main advantage of trading using opposite Subsea 7 and SeaBird Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subsea 7 position performs unexpectedly, SeaBird Exploration 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 SeaBird Exploration will offset losses from the drop in SeaBird Exploration's long position.| Subsea 7 vs. TGS NOPEC Geophysical | Subsea 7 vs. Aker Solutions ASA | Subsea 7 vs. Storebrand ASA | Subsea 7 vs. Dno ASA |
| SeaBird Exploration vs. Subsea 7 SA | SeaBird Exploration vs. Aker ASA | SeaBird Exploration vs. Dno ASA | SeaBird Exploration vs. Aker Carbon Capture |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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