Correlation Between SBM Offshore and AMG Advanced

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

Diversification Opportunities for SBM Offshore and AMG Advanced

0.75

Correlation Coefficient

SBM Offshore  AMG Advanced

Poor diversification

The 3 months correlation between SBM and AMG is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and AMG Advanced Metallurgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMG Advanced Metallu 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 AMG Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMG Advanced Metallu has no effect on the direction of SBM Offshore i.e., SBM Offshore and AMG Advanced go up and down completely randomly.

Pair Corralation between SBM Offshore and AMG Advanced

Assuming the 90 days trading horizon SBM Offshore is expected to generate 1.6 times less return on investment than AMG Advanced. But when comparing it to its historical volatility, SBM Offshore NV is 1.79 times less risky than AMG Advanced. It trades about 0.15 of its potential returns per unit of risk. AMG Advanced Metallurgical is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,347  in AMG Advanced Metallurgical on December 20, 2024 and sell it today you would earn a total of  435.00  from holding AMG Advanced Metallurgical or generate 32.29% return on investment over 90 days.

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

SBM Offshore NV  vs.  AMG Advanced Metallurgical

SBM Offshore NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, SBM Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

AMG Advanced Metallu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AMG Advanced Metallurgical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AMG Advanced unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBM Offshore and AMG Advanced

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

The idea behind SBM Offshore NV and AMG Advanced Metallurgical 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.