Correlation Between SBM Offshore and Diamond Offshore
Can any of the company-specific risk be diversified away by investing in both SBM Offshore and Diamond 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 SBM Offshore and Diamond Offshore 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 Diamond Offshore Drilling, you can compare the effects of market volatilities on SBM Offshore and Diamond 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 SBM Offshore with a short position of Diamond Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Diamond Offshore.
Diversification Opportunities for SBM Offshore and Diamond Offshore
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and Diamond is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Diamond Offshore Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Offshore Drilling 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 Diamond Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Offshore Drilling has no effect on the direction of SBM Offshore i.e., SBM Offshore and Diamond Offshore go up and down completely randomly.
Pair Corralation between SBM Offshore and Diamond Offshore
Assuming the 90 days horizon SBM Offshore NV is expected to generate 1.34 times more return on investment than Diamond Offshore. However, SBM Offshore is 1.34 times more volatile than Diamond Offshore Drilling. It trades about 0.15 of its potential returns per unit of risk. Diamond Offshore Drilling is currently generating about 0.12 per unit of risk. If you would invest 1,292 in SBM Offshore NV on January 20, 2024 and sell it today you would earn a total of 265.00 from holding SBM Offshore NV or generate 20.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
SBM Offshore NV vs. Diamond Offshore Drilling
Performance |
Timeline |
SBM Offshore NV |
Diamond Offshore Drilling |
SBM Offshore and Diamond Offshore Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SBM Offshore and Diamond Offshore
The main advantage of trading using opposite SBM Offshore and Diamond Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Diamond 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 Diamond Offshore will offset losses from the drop in Diamond Offshore's long position.SBM Offshore vs. Fiserv Inc | SBM Offshore vs. Schlumberger NV | SBM Offshore vs. Halliburton | SBM Offshore vs. Baker Hughes Co |
Diamond Offshore vs. Seadrill Limited | Diamond Offshore vs. Nabors Industries | Diamond Offshore vs. Borr Drilling | Diamond Offshore vs. Patterson UTI Energy |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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