Correlation Between SBM OFFSHORE and United Airlines
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and United Airlines 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 United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM OFFSHORE and United Airlines Holdings, you can compare the effects of market volatilities on SBM OFFSHORE and United Airlines 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 United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and United Airlines.
Diversification Opportunities for SBM OFFSHORE and United Airlines
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and United is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 are associated (or correlated) with United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and United Airlines go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and United Airlines
Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 17.17 times less return on investment than United Airlines. But when comparing it to its historical volatility, SBM OFFSHORE is 2.06 times less risky than United Airlines. It trades about 0.05 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 4,511 in United Airlines Holdings on September 15, 2024 and sell it today you would earn a total of 4,889 from holding United Airlines Holdings or generate 108.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
SBM OFFSHORE vs. United Airlines Holdings
Performance |
Timeline |
SBM OFFSHORE |
United Airlines Holdings |
SBM OFFSHORE and United Airlines Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SBM OFFSHORE and United Airlines
The main advantage of trading using opposite SBM OFFSHORE and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, United Airlines 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 United Airlines will offset losses from the drop in United Airlines' long position.SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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