Correlation Between SBM Offshore and National Vision

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

Diversification Opportunities for SBM Offshore and National Vision

-0.05

Correlation Coefficient

SBM Offshore  National Vision

Good diversification

The 3 months correlation between SBM and National is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and National Vision Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Vision 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 NV are associated (or correlated) with National Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Vision Holdings has no effect on the direction of SBM Offshore i.e., SBM Offshore and National Vision go up and down completely randomly.

Pair Corralation between SBM Offshore and National Vision

Assuming the 90 days horizon SBM Offshore NV is expected to under-perform the National Vision. But the pink sheet apears to be less risky and, when comparing its historical volatility, SBM Offshore NV is 1.23 times less risky than National Vision. The pink sheet trades about -0.04 of its potential returns per unit of risk. The National Vision Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,065  in National Vision Holdings on September 24, 2024 and sell it today you would earn a total of  92.00  from holding National Vision Holdings or generate 8.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

SBM Offshore NV  vs.  National Vision Holdings

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM Offshore NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

National Vision Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, National Vision may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SBM Offshore and National Vision

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

The idea behind SBM Offshore NV and National Vision Holdings 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.