Correlation Between SBM OFFSHORE and CeoTronics

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

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

Diversification Opportunities for SBM OFFSHORE and CeoTronics

-0.22

Correlation Coefficient

SBM OFFSHORE  CeoTronics

Very good diversification

The 3 months correlation between SBM and CeoTronics is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and CeoTronics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CeoTronics AG 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 CeoTronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CeoTronics AG has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and CeoTronics go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and CeoTronics

Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 1.37 times less return on investment than CeoTronics. But when comparing it to its historical volatility, SBM OFFSHORE is 1.54 times less risky than CeoTronics. It trades about 0.05 of its potential returns per unit of risk. CeoTronics AG is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  425.00  in CeoTronics AG on October 10, 2024 and sell it today you would earn a total of  175.00  from holding CeoTronics AG or generate 41.18% return on investment over 90 days.

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

SBM OFFSHORE  vs.  CeoTronics AG

SBM OFFSHORE

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 3 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

CeoTronics AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CeoTronics AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward-looking signals, CeoTronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBM OFFSHORE and CeoTronics

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

The idea behind SBM OFFSHORE and CeoTronics AG 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.