Correlation Between SBM Offshore and Gap,

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

Diversification Opportunities for SBM Offshore and Gap,

-0.52

Correlation Coefficient

SBM Offshore  Gap,

Excellent diversification

The 3 months correlation between SBM and Gap, is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of SBM Offshore i.e., SBM Offshore and Gap, go up and down completely randomly.

Pair Corralation between SBM Offshore and Gap,

Assuming the 90 days horizon SBM Offshore is expected to generate 3.05 times less return on investment than Gap,. But when comparing it to its historical volatility, SBM Offshore NV is 1.5 times less risky than Gap,. It trades about 0.05 of its potential returns per unit of risk. The Gap, is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  870.00  in The Gap, on September 30, 2024 and sell it today you would earn a total of  1,558  from holding The Gap, or generate 179.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	63.27%
Values	Daily Returns

SBM Offshore NV  vs.  The Gap,

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Gap,

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with SBM Offshore and Gap,

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

The idea behind SBM Offshore NV and The Gap, 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.