Correlation Between Subsea 7 and Profire Ene
Can any of the company-specific risk be diversified away by investing in both Subsea 7 and Profire Ene 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 Profire Ene 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 Profire Ene, you can compare the effects of market volatilities on Subsea 7 and Profire Ene 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 Profire Ene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subsea 7 and Profire Ene.
Diversification Opportunities for Subsea 7 and Profire Ene
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Subsea and Profire is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Subsea 7 SA and Profire Ene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profire Ene 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 Profire Ene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profire Ene has no effect on the direction of Subsea 7 i.e., Subsea 7 and Profire Ene go up and down completely randomly.
Pair Corralation between Subsea 7 and Profire Ene
Assuming the 90 days horizon Subsea 7 SA is expected to generate 0.42 times more return on investment than Profire Ene. However, Subsea 7 SA is 2.39 times less risky than Profire Ene. It trades about 0.21 of its potential returns per unit of risk. Profire Ene is currently generating about 0.06 per unit of risk. If you would invest 1,114 in Subsea 7 SA on August 28, 2024 and sell it today you would earn a total of 106.00 from holding Subsea 7 SA or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 5.05% |
| Values | Daily Returns |
Subsea 7 SA vs. Profire Ene
Performance |
| Timeline |
| Subsea 7 SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Profire Ene |
Subsea 7 and Profire Ene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Subsea 7 and Profire Ene
The main advantage of trading using opposite Subsea 7 and Profire Ene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subsea 7 position performs unexpectedly, Profire Ene 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 Profire Ene will offset losses from the drop in Profire Ene's long position.| Subsea 7 vs. Bri Chem Corp | Subsea 7 vs. Pulse Seismic | Subsea 7 vs. Worley Parsons | Subsea 7 vs. Petrofac Ltd ADR |
| Profire Ene vs. Enservco Co | Profire Ene vs. Nine Energy Service | Profire Ene vs. Enerflex | Profire Ene vs. Geospace Technologies |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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