Correlation Between SBM Offshore and Simon Property

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

Diversification Opportunities for SBM Offshore and Simon Property

0.02

Correlation Coefficient

SBM Offshore  Simon Property

Significant diversification

The 3 months correlation between SBM and Simon is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Simon Property Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simon Property 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 Simon Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simon Property Group has no effect on the direction of SBM Offshore i.e., SBM Offshore and Simon Property go up and down completely randomly.

Pair Corralation between SBM Offshore and Simon Property

Assuming the 90 days horizon SBM Offshore NV is expected to generate 3.38 times more return on investment than Simon Property. However, SBM Offshore is 3.38 times more volatile than Simon Property Group. It trades about 0.03 of its potential returns per unit of risk. Simon Property Group is currently generating about 0.07 per unit of risk. If you would invest  1,577  in SBM Offshore NV on September 24, 2024 and sell it today you would earn a total of  123.00  from holding SBM Offshore NV or generate 7.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	72.43%
Values	Daily Returns

SBM Offshore NV  vs.  Simon Property 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.

Simon Property Group

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Simon Property is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SBM Offshore and Simon Property

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

The idea behind SBM Offshore NV and Simon Property 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.