Correlation Between Evolution and SBM OFFSHORE

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

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

Diversification Opportunities for Evolution and SBM OFFSHORE

-0.34

Correlation Coefficient

Evolution  SBM OFFSHORE

Very good diversification

The 3 months correlation between Evolution and SBM is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE and Evolution 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 Evolution AB 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 Evolution i.e., Evolution and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between Evolution and SBM OFFSHORE

Assuming the 90 days trading horizon Evolution AB is expected to under-perform the SBM OFFSHORE. In addition to that, Evolution is 1.02 times more volatile than SBM OFFSHORE. It trades about -0.21 of its total potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.08 per unit of volatility. If you would invest  1,691  in SBM OFFSHORE on October 26, 2024 and sell it today you would earn a total of  120.00  from holding SBM OFFSHORE or generate 7.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Evolution AB  vs.  SBM OFFSHORE

Evolution AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SBM OFFSHORE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 6 (%) 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 February 2025.

Pair Trading with Evolution and SBM OFFSHORE

The main advantage of trading using opposite Evolution and SBM OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution 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 Evolution AB 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.