Correlation Between PLAYWAY SA and SBM OFFSHORE

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

By analyzing existing cross correlation between PLAYWAY SA ZY 10 and SBM OFFSHORE, you can compare the effects of market volatilities on PLAYWAY SA 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 PLAYWAY SA with a short position of SBM OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAYWAY SA and SBM OFFSHORE.

Diversification Opportunities for PLAYWAY SA and SBM OFFSHORE

-0.12

Correlation Coefficient

PLAYWAY SA  SBM OFFSHORE

Good diversification

The 3 months correlation between PLAYWAY and SBM is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding PLAYWAY SA ZY 10 and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE and PLAYWAY SA 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 PLAYWAY SA ZY 10 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 has no effect on the direction of PLAYWAY SA i.e., PLAYWAY SA and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between PLAYWAY SA and SBM OFFSHORE

Assuming the 90 days horizon PLAYWAY SA ZY 10 is expected to generate 2.0 times more return on investment than SBM OFFSHORE. However, PLAYWAY SA is 2.0 times more volatile than SBM OFFSHORE. It trades about 0.04 of its potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.05 per unit of risk. If you would invest  4,703  in PLAYWAY SA ZY 10 on October 11, 2024 and sell it today you would earn a total of  1,857  from holding PLAYWAY SA ZY 10 or generate 39.49% return on investment over 90 days.

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

PLAYWAY SA ZY 10  vs.  SBM OFFSHORE

PLAYWAY SA ZY

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYWAY SA ZY 10 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PLAYWAY SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SBM OFFSHORE

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SBM OFFSHORE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PLAYWAY SA and SBM OFFSHORE

The main advantage of trading using opposite PLAYWAY SA and SBM OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLAYWAY SA 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 PLAYWAY SA ZY 10 and SBM OFFSHORE 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.