Correlation Between Livermore Investments and SBM Offshore

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

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

Diversification Opportunities for Livermore Investments and SBM Offshore

0.28

Correlation Coefficient

Livermore Investments  SBM Offshore

Modest diversification

The 3 months correlation between Livermore and SBM is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Livermore Investments 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 Livermore Investments 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 Livermore Investments 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 Livermore Investments i.e., Livermore Investments and SBM Offshore go up and down completely randomly.

Pair Corralation between Livermore Investments and SBM Offshore

Assuming the 90 days trading horizon Livermore Investments Group is expected to generate 1.59 times more return on investment than SBM Offshore. However, Livermore Investments is 1.59 times more volatile than SBM Offshore NV. It trades about 0.28 of its potential returns per unit of risk. SBM Offshore NV is currently generating about 0.04 per unit of risk. If you would invest  3,598  in Livermore Investments Group on September 26, 2024 and sell it today you would earn a total of  1,802  from holding Livermore Investments Group or generate 50.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Livermore Investments Group  vs.  SBM Offshore NV

Livermore Investments

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Livermore Investments Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Livermore Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

SBM Offshore NV

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, SBM Offshore is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Livermore Investments and SBM Offshore

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

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.