Correlation Between SBM Offshore and ChampionX

Can any of the company-specific risk be diversified away by investing in both SBM Offshore and ChampionX 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 ChampionX 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 ChampionX, you can compare the effects of market volatilities on SBM Offshore and ChampionX 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 ChampionX. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and ChampionX.

Diversification Opportunities for SBM Offshore and ChampionX

0.09

Correlation Coefficient

SBM Offshore  ChampionX

Significant diversification

The 3 months correlation between SBM and ChampionX is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX 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 ChampionX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChampionX has no effect on the direction of SBM Offshore i.e., SBM Offshore and ChampionX go up and down completely randomly.

Pair Corralation between SBM Offshore and ChampionX

Assuming the 90 days horizon SBM Offshore NV is expected to generate 0.66 times more return on investment than ChampionX. However, SBM Offshore NV is 1.51 times less risky than ChampionX. It trades about 0.06 of its potential returns per unit of risk. ChampionX is currently generating about 0.03 per unit of risk. If you would invest  1,801  in SBM Offshore NV on August 31, 2024 and sell it today you would earn a total of  79.00  from holding SBM Offshore NV or generate 4.39% return on investment over 90 days.

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

SBM Offshore NV  vs.  ChampionX

SBM Offshore NV

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ChampionX

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ChampionX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, ChampionX is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SBM Offshore and ChampionX

The main advantage of trading using opposite SBM Offshore and ChampionX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, ChampionX 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 ChampionX will offset losses from the drop in ChampionX's long position.

The idea behind SBM Offshore NV and ChampionX 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.