Correlation Between SBM OFFSHORE and Renesas Electronics

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

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

Diversification Opportunities for SBM OFFSHORE and Renesas Electronics

-0.1

Correlation Coefficient

SBM OFFSHORE  Renesas Electronics

Good diversification

The 3 months correlation between SBM and Renesas is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and Renesas Electronics go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and Renesas Electronics

Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 4.37 times less return on investment than Renesas Electronics. But when comparing it to its historical volatility, SBM OFFSHORE is 1.47 times less risky than Renesas Electronics. It trades about 0.03 of its potential returns per unit of risk. Renesas Electronics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,161  in Renesas Electronics on October 6, 2024 and sell it today you would earn a total of  82.00  from holding Renesas Electronics or generate 7.06% 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.  Renesas Electronics

SBM OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM OFFSHORE has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Renesas Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SBM OFFSHORE and Renesas Electronics

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

The idea behind SBM OFFSHORE and Renesas Electronics 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 Anywhere module to track or share privately all of your investments from the convenience of any device.