Correlation Between SBM Offshore and American Battery

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

By analyzing existing cross correlation between SBM Offshore NV and American Battery Technology, you can compare the effects of market volatilities on SBM Offshore and American Battery 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 American Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and American Battery.

Diversification Opportunities for SBM Offshore and American Battery

-0.29

Correlation Coefficient

SBM Offshore  American Battery

Very good diversification

The 3 months correlation between SBM and American is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and American Battery Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Battery Tec 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 NV are associated (or correlated) with American Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Battery Tec has no effect on the direction of SBM Offshore i.e., SBM Offshore and American Battery go up and down completely randomly.

Pair Corralation between SBM Offshore and American Battery

Assuming the 90 days horizon SBM Offshore NV is expected to generate 0.41 times more return on investment than American Battery. However, SBM Offshore NV is 2.44 times less risky than American Battery. It trades about 0.09 of its potential returns per unit of risk. American Battery Technology is currently generating about -0.05 per unit of risk. If you would invest  1,188  in SBM Offshore NV on December 2, 2024 and sell it today you would earn a total of  1,087  from holding SBM Offshore NV or generate 91.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.98%
Values	Daily Returns

SBM Offshore NV  vs.  American Battery Technology

SBM Offshore NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, SBM Offshore showed solid returns over the last few months and may actually be approaching a breakup point.

American Battery Tec

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Battery Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, American Battery unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBM Offshore and American Battery

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

The idea behind SBM Offshore NV and American Battery Technology 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..