Correlation Between Roper Technologies and SBM Offshore

Can any of the company-specific risk be diversified away by investing in both Roper Technologies 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 Roper Technologies and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Roper Technologies and SBM Offshore NV, you can compare the effects of market volatilities on Roper Technologies 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 Roper Technologies with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roper Technologies and SBM Offshore.

Diversification Opportunities for Roper Technologies and SBM Offshore

0.25

Correlation Coefficient

Roper Technologies  SBM Offshore

Modest diversification

The 3 months correlation between Roper and SBM is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Roper Technologies 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 Roper Technologies 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 Roper Technologies 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 Roper Technologies i.e., Roper Technologies and SBM Offshore go up and down completely randomly.

Pair Corralation between Roper Technologies and SBM Offshore

Assuming the 90 days trading horizon Roper Technologies is expected to generate 6.03 times less return on investment than SBM Offshore. But when comparing it to its historical volatility, Roper Technologies is 1.36 times less risky than SBM Offshore. It trades about 0.01 of its potential returns per unit of risk. SBM Offshore NV is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,602  in SBM Offshore NV on September 12, 2024 and sell it today you would earn a total of  95.00  from holding SBM Offshore NV or generate 5.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Roper Technologies  vs.  SBM Offshore NV

Roper Technologies

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roper Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Roper Technologies is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SBM Offshore NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, SBM Offshore may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Roper Technologies and SBM Offshore

The main advantage of trading using opposite Roper Technologies and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roper Technologies 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.

The idea behind Roper Technologies and SBM Offshore NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.