Correlation Between AXA SA and SBM OFFSHORE

Can any of the company-specific risk be diversified away by investing in both AXA 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 AXA 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 AXA SA and SBM OFFSHORE, you can compare the effects of market volatilities on AXA 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 AXA SA with a short position of SBM OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of AXA SA and SBM OFFSHORE.

Diversification Opportunities for AXA SA and SBM OFFSHORE

0.81

Correlation Coefficient

AXA SA  SBM OFFSHORE

Very poor diversification

The 3 months correlation between AXA and SBM is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding AXA SA and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE and AXA 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 AXA SA 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 AXA SA i.e., AXA SA and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between AXA SA and SBM OFFSHORE

Assuming the 90 days trading horizon AXA SA is expected to generate 1.12 times less return on investment than SBM OFFSHORE. But when comparing it to its historical volatility, AXA SA is 1.92 times less risky than SBM OFFSHORE. It trades about 0.3 of its potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,645  in SBM OFFSHORE on December 19, 2024 and sell it today you would earn a total of  353.00  from holding SBM OFFSHORE or generate 21.46% return on investment over 90 days.

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

AXA SA  vs.  SBM OFFSHORE

AXA SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AXA SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, AXA SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

SBM OFFSHORE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, SBM OFFSHORE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AXA SA and SBM OFFSHORE

The main advantage of trading using opposite AXA SA and SBM OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AXA 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 AXA SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..