Correlation Between SBM OFFSHORE and AXA SA

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

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

Diversification Opportunities for SBM OFFSHORE and AXA SA

0.81

Correlation Coefficient

SBM OFFSHORE  AXA SA

Very poor diversification

The 3 months correlation between SBM and AXA is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA SA 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 AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and AXA SA go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and AXA SA

Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 1.92 times more return on investment than AXA SA. However, SBM OFFSHORE is 1.92 times more volatile than AXA SA. It trades about 0.17 of its potential returns per unit of risk. AXA SA is currently generating about 0.3 per unit of risk. 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

SBM OFFSHORE  vs.  AXA SA

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.

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.

Pair Trading with SBM OFFSHORE and AXA SA

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

The idea behind SBM OFFSHORE and AXA 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.