Correlation Between United Utilities and SBM Offshore
Can any of the company-specific risk be diversified away by investing in both United Utilities and SBM Offshore 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 United Utilities and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and SBM Offshore NV, you can compare the effects of market volatilities on United Utilities and SBM Offshore 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 United Utilities with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and SBM Offshore.
Diversification Opportunities for United Utilities and SBM Offshore
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between United and SBM is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV and United Utilities 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 United Utilities Group are associated (or correlated) with SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of United Utilities i.e., United Utilities and SBM Offshore go up and down completely randomly.
Pair Corralation between United Utilities and SBM Offshore
Assuming the 90 days trading horizon United Utilities is expected to generate 1.36 times less return on investment than SBM Offshore. But when comparing it to its historical volatility, United Utilities Group is 1.28 times less risky than SBM Offshore. It trades about 0.04 of its potential returns per unit of risk. SBM Offshore NV is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,316 in SBM Offshore NV on September 1, 2024 and sell it today you would earn a total of 399.00 from holding SBM Offshore NV or generate 30.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. SBM Offshore NV
Performance |
| Timeline |
| United Utilities |
| SBM Offshore NV |
United Utilities and SBM Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and SBM Offshore
The main advantage of trading using opposite United Utilities and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, SBM Offshore 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 SBM Offshore will offset losses from the drop in SBM Offshore's long position.| United Utilities vs. Sabre Insurance Group | United Utilities vs. Orient Telecoms | United Utilities vs. Verizon Communications | United Utilities vs. Ross Stores |
| SBM Offshore vs. Bankers Investment Trust | SBM Offshore vs. Elmos Semiconductor SE | SBM Offshore vs. Beeks Trading | SBM Offshore vs. Tatton Asset Management |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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