Correlation Between Caseys General and SBM OFFSHORE

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

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

Diversification Opportunities for Caseys General and SBM OFFSHORE

0.7

Correlation Coefficient

Caseys General  SBM OFFSHORE

Poor diversification

The 3 months correlation between Caseys and SBM is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE and Caseys General 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 Caseys General Stores 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 Caseys General i.e., Caseys General and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between Caseys General and SBM OFFSHORE

Assuming the 90 days trading horizon Caseys General Stores is expected to generate 0.7 times more return on investment than SBM OFFSHORE. However, Caseys General Stores is 1.42 times less risky than SBM OFFSHORE. It trades about 0.07 of its potential returns per unit of risk. SBM OFFSHORE is currently generating about -0.1 per unit of risk. If you would invest  38,600  in Caseys General Stores on September 12, 2024 and sell it today you would earn a total of  800.00  from holding Caseys General Stores or generate 2.07% return on investment over 90 days.

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

Caseys General Stores  vs.  SBM OFFSHORE

Caseys General Stores

Risk-Adjusted Performance

10 of 100

OK

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

SBM OFFSHORE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SBM OFFSHORE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Caseys General and SBM OFFSHORE

The main advantage of trading using opposite Caseys General and SBM OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caseys General 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 Caseys General Stores 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.