Correlation Between SBM OFFSHORE and Gaztransport Technigaz

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

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

Diversification Opportunities for SBM OFFSHORE and Gaztransport Technigaz

0.68

Correlation Coefficient

SBM OFFSHORE  Gaztransport Technigaz

Poor diversification

The 3 months correlation between SBM and Gaztransport is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and Gaztransport Technigaz SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaztransport Technigaz and SBM OFFSHORE 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 SBM OFFSHORE are associated (or correlated) with Gaztransport Technigaz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaztransport Technigaz has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and Gaztransport Technigaz go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and Gaztransport Technigaz

Assuming the 90 days trading horizon SBM OFFSHORE is expected to under-perform the Gaztransport Technigaz. But the stock apears to be less risky and, when comparing its historical volatility, SBM OFFSHORE is 1.19 times less risky than Gaztransport Technigaz. The stock trades about -0.18 of its potential returns per unit of risk. The Gaztransport Technigaz SA is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  13,522  in Gaztransport Technigaz SA on September 19, 2024 and sell it today you would lose (352.00) from holding Gaztransport Technigaz SA or give up 2.6% of portfolio value over 90 days.

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

SBM OFFSHORE  vs.  Gaztransport Technigaz SA

SBM OFFSHORE

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SBM OFFSHORE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gaztransport Technigaz

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport Technigaz SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gaztransport Technigaz is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SBM OFFSHORE and Gaztransport Technigaz

The main advantage of trading using opposite SBM OFFSHORE and Gaztransport Technigaz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, Gaztransport Technigaz 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 Gaztransport Technigaz will offset losses from the drop in Gaztransport Technigaz's long position.

The idea behind SBM OFFSHORE and Gaztransport Technigaz SA 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.