Correlation Between SBM Offshore and PVH Corp

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

Diversification Opportunities for SBM Offshore and PVH Corp

-0.38

Correlation Coefficient

SBM Offshore  PVH Corp

Very good diversification

The 3 months correlation between SBM and PVH is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH Corp 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 PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of SBM Offshore i.e., SBM Offshore and PVH Corp go up and down completely randomly.

Pair Corralation between SBM Offshore and PVH Corp

Assuming the 90 days horizon SBM Offshore NV is expected to generate 0.73 times more return on investment than PVH Corp. However, SBM Offshore NV is 1.36 times less risky than PVH Corp. It trades about 0.0 of its potential returns per unit of risk. PVH Corp is currently generating about -0.18 per unit of risk. If you would invest  1,574  in SBM Offshore NV on January 29, 2024 and sell it today you would lose (17.00) from holding SBM Offshore NV or give up 1.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SBM Offshore NV  vs.  PVH Corp

SBM Offshore NV

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, SBM Offshore showed solid returns over the last few months and may actually be approaching a breakup point.

PVH Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PVH Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with SBM Offshore and PVH Corp

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

The idea behind SBM Offshore NV and PVH Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.