Correlation Between Sembcorp Marine and Airbus Group

Can any of the company-specific risk be diversified away by investing in both Sembcorp Marine and Airbus Group 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 Sembcorp Marine and Airbus Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sembcorp Marine and Airbus Group NV, you can compare the effects of market volatilities on Sembcorp Marine and Airbus Group 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 Sembcorp Marine with a short position of Airbus Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sembcorp Marine and Airbus Group.

Diversification Opportunities for Sembcorp Marine and Airbus Group

0.07

Correlation Coefficient

Sembcorp Marine  Airbus Group

Significant diversification

The 3 months correlation between Sembcorp and Airbus is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sembcorp Marine and Airbus Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group NV and Sembcorp Marine 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 Sembcorp Marine are associated (or correlated) with Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group NV has no effect on the direction of Sembcorp Marine i.e., Sembcorp Marine and Airbus Group go up and down completely randomly.

Pair Corralation between Sembcorp Marine and Airbus Group

Assuming the 90 days horizon Sembcorp Marine is expected to under-perform the Airbus Group. In addition to that, Sembcorp Marine is 2.98 times more volatile than Airbus Group NV. It trades about -0.01 of its total potential returns per unit of risk. Airbus Group NV is currently generating about 0.1 per unit of volatility. If you would invest  3,805  in Airbus Group NV on September 4, 2024 and sell it today you would earn a total of  147.00  from holding Airbus Group NV or generate 3.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Sembcorp Marine  vs.  Airbus Group NV

Sembcorp Marine

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sembcorp Marine are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Sembcorp Marine reported solid returns over the last few months and may actually be approaching a breakup point.

Airbus Group NV

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Sembcorp Marine and Airbus Group

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

The idea behind Sembcorp Marine and Airbus Group NV 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.