Correlation Between East Africa and SBM Offshore

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

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

Diversification Opportunities for East Africa and SBM Offshore

0.0

Correlation Coefficient

East Africa  SBM Offshore

Pay attention - limited upside

The 3 months correlation between East and SBM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals 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 East Africa 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 East Africa Metals 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 East Africa i.e., East Africa and SBM Offshore go up and down completely randomly.

Pair Corralation between East Africa and SBM Offshore

If you would invest  1,790  in SBM Offshore NV on December 5, 2024 and sell it today you would earn a total of  485.00  from holding SBM Offshore NV or generate 27.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

East Africa Metals  vs.  SBM Offshore NV

East Africa Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, East Africa is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SBM Offshore NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, SBM Offshore showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with East Africa and SBM Offshore

The main advantage of trading using opposite East Africa and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa 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 East Africa Metals 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.