Correlation Between Invesco Health and SBM Offshore

Can any of the company-specific risk be diversified away by investing in both Invesco Health and SBM Offshore 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 Invesco Health and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco Health Care and SBM Offshore NV, you can compare the effects of market volatilities on Invesco Health and SBM Offshore 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 Invesco Health with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Health and SBM Offshore.

Diversification Opportunities for Invesco Health and SBM Offshore

-0.72

Correlation Coefficient

Invesco Health  SBM Offshore

Pay attention - limited upside

The 3 months correlation between Invesco and SBM is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Health Care and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV and Invesco Health 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 Invesco Health Care are associated (or correlated) with SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of Invesco Health i.e., Invesco Health and SBM Offshore go up and down completely randomly.

Pair Corralation between Invesco Health and SBM Offshore

Assuming the 90 days trading horizon Invesco Health is expected to generate 2.63 times less return on investment than SBM Offshore. But when comparing it to its historical volatility, Invesco Health Care is 2.5 times less risky than SBM Offshore. It trades about 0.02 of its potential returns per unit of risk. SBM Offshore NV is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,706  in SBM Offshore NV on September 3, 2024 and sell it today you would earn a total of  9.00  from holding SBM Offshore NV or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Invesco Health Care  vs.  SBM Offshore NV

Invesco Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Invesco Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SBM Offshore NV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, SBM Offshore is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Invesco Health and SBM Offshore

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

The idea behind Invesco Health Care and SBM Offshore 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.