Correlation Between SBM OFFSHORE and Veolia Environnement

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

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

Diversification Opportunities for SBM OFFSHORE and Veolia Environnement

-0.56

Correlation Coefficient

SBM OFFSHORE  Veolia Environnement

Excellent diversification

The 3 months correlation between SBM and Veolia is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement 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 Veolia Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veolia Environnement has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and Veolia Environnement go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and Veolia Environnement

Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 1.39 times more return on investment than Veolia Environnement. However, SBM OFFSHORE is 1.39 times more volatile than Veolia Environnement SA. It trades about 0.05 of its potential returns per unit of risk. Veolia Environnement SA is currently generating about -0.1 per unit of risk. If you would invest  1,604  in SBM OFFSHORE on September 14, 2024 and sell it today you would earn a total of  58.00  from holding SBM OFFSHORE or generate 3.62% return on investment over 90 days.

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

SBM OFFSHORE  vs.  Veolia Environnement SA

SBM OFFSHORE

Risk-Adjusted Performance

3 of 100

Modest

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Veolia Environnement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veolia Environnement SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with SBM OFFSHORE and Veolia Environnement

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

The idea behind SBM OFFSHORE and Veolia Environnement 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.