Correlation Between SBM Offshore and NETGEAR

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

Diversification Opportunities for SBM Offshore and NETGEAR

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between SBM and NETGEAR is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of SBM Offshore i.e., SBM Offshore and NETGEAR go up and down completely randomly.

Pair Corralation between SBM Offshore and NETGEAR

Assuming the 90 days horizon SBM Offshore NV is expected to under-perform the NETGEAR. In addition to that, SBM Offshore is 1.08 times more volatile than NETGEAR. It trades about -0.2 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.3 per unit of volatility. If you would invest  2,410  in NETGEAR on September 21, 2024 and sell it today you would earn a total of  390.00  from holding NETGEAR or generate 16.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

SBM Offshore NV  vs.  NETGEAR

 Performance 
       Timeline  
SBM Offshore NV 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

SBM Offshore and NETGEAR Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SBM Offshore and NETGEAR

The main advantage of trading using opposite SBM Offshore and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR's long position.
The idea behind SBM Offshore NV and NETGEAR 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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