Correlation Between SBM Offshore and China Clean

Can any of the company-specific risk be diversified away by investing in both SBM Offshore and China Clean 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 China Clean 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 China Clean Energy, you can compare the effects of market volatilities on SBM Offshore and China Clean 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 China Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and China Clean.

Diversification Opportunities for SBM Offshore and China Clean

0.0

Correlation Coefficient

SBM Offshore  China Clean

Pay attention - limited upside

The 3 months correlation between SBM and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and China Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Clean Energy 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 China Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Clean Energy has no effect on the direction of SBM Offshore i.e., SBM Offshore and China Clean go up and down completely randomly.

Pair Corralation between SBM Offshore and China Clean

If you would invest  1,700  in SBM Offshore NV on December 18, 2024 and sell it today you would earn a total of  585.00  from holding SBM Offshore NV or generate 34.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

SBM Offshore NV  vs.  China Clean Energy

SBM Offshore NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 12 (%) 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.

China Clean Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, China Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SBM Offshore and China Clean

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

The idea behind SBM Offshore NV and China Clean Energy 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.