Correlation Between SBM Offshore and Kinsale Capital

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

Diversification Opportunities for SBM Offshore and Kinsale Capital

-0.23

Correlation Coefficient

SBM Offshore  Kinsale Capital

Very good diversification

The 3 months correlation between SBM and Kinsale is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Kinsale Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinsale Capital Group 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 Kinsale Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinsale Capital Group has no effect on the direction of SBM Offshore i.e., SBM Offshore and Kinsale Capital go up and down completely randomly.

Pair Corralation between SBM Offshore and Kinsale Capital

Assuming the 90 days horizon SBM Offshore NV is expected to generate 0.91 times more return on investment than Kinsale Capital. However, SBM Offshore NV is 1.1 times less risky than Kinsale Capital. It trades about 0.08 of its potential returns per unit of risk. Kinsale Capital Group is currently generating about 0.06 per unit of risk. If you would invest  1,211  in SBM Offshore NV on September 14, 2024 and sell it today you would earn a total of  479.00  from holding SBM Offshore NV or generate 39.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.35%
Values	Daily Returns

SBM Offshore NV  vs.  Kinsale Capital Group

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.

Kinsale Capital Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinsale Capital Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Kinsale Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SBM Offshore and Kinsale Capital

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

The idea behind SBM Offshore NV and Kinsale Capital Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.