Correlation Between SBM Offshore and Par Pacific

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

Diversification Opportunities for SBM Offshore and Par Pacific

0.37

Correlation Coefficient

SBM Offshore  Par Pacific

Weak diversification

The 3 months correlation between SBM and Par is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Par Pacific Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Par Pacific 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 Par Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Par Pacific Holdings has no effect on the direction of SBM Offshore i.e., SBM Offshore and Par Pacific go up and down completely randomly.

Pair Corralation between SBM Offshore and Par Pacific

Assuming the 90 days horizon SBM Offshore NV is expected to generate 0.97 times more return on investment than Par Pacific. However, SBM Offshore NV is 1.03 times less risky than Par Pacific. It trades about 0.05 of its potential returns per unit of risk. Par Pacific Holdings is currently generating about -0.05 per unit of risk. If you would invest  1,435  in SBM Offshore NV on September 30, 2024 and sell it today you would earn a total of  308.00  from holding SBM Offshore NV or generate 21.46% return on investment over 90 days.

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

SBM Offshore NV  vs.  Par Pacific 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Par Pacific Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Par Pacific Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Par Pacific is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SBM Offshore and Par Pacific

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

The idea behind SBM Offshore NV and Par Pacific 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.