Correlation Between SBM OFFSHORE and ENN Energy

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

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

Diversification Opportunities for SBM OFFSHORE and ENN Energy

-0.17

Correlation Coefficient

SBM OFFSHORE  ENN Energy

Good diversification

The 3 months correlation between SBM and ENN is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and ENN Energy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENN Energy Holdings 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 ENN Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENN Energy Holdings has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and ENN Energy go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and ENN Energy

Assuming the 90 days trading horizon SBM OFFSHORE is expected to under-perform the ENN Energy. But the stock apears to be less risky and, when comparing its historical volatility, SBM OFFSHORE is 2.73 times less risky than ENN Energy. The stock trades about -0.1 of its potential returns per unit of risk. The ENN Energy Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  640.00  in ENN Energy Holdings on October 5, 2024 and sell it today you would earn a total of  35.00  from holding ENN Energy Holdings or generate 5.47% 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.  ENN Energy Holdings

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

ENN Energy Holdings

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days ENN Energy Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile technical indicators, ENN Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SBM OFFSHORE and ENN Energy

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

The idea behind SBM OFFSHORE and ENN Energy Holdings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.