Correlation Between Afya and SBM Offshore

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

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

Diversification Opportunities for Afya and SBM Offshore

0.42

Correlation Coefficient

Afya  SBM Offshore

Very weak diversification

The 3 months correlation between Afya and SBM is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Afya 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 Afya 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 Afya 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 Afya i.e., Afya and SBM Offshore go up and down completely randomly.

Pair Corralation between Afya and SBM Offshore

Given the investment horizon of 90 days Afya is expected to under-perform the SBM Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Afya is 1.04 times less risky than SBM Offshore. The stock trades about -0.07 of its potential returns per unit of risk. The SBM Offshore NV is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,801  in SBM Offshore NV on September 19, 2024 and sell it today you would lose (41.00) from holding SBM Offshore NV or give up 2.28% of portfolio value over 90 days.

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

Afya  vs.  SBM Offshore NV

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afya 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 current disturbance on Wall Street may also be a sign of long term gains for the company investors.

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM Offshore NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Afya and SBM Offshore

The main advantage of trading using opposite Afya and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Afya 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 Afya 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.