Correlation Between SBM Offshore and Arcadis NV

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

Diversification Opportunities for SBM Offshore and Arcadis NV

-0.46

Correlation Coefficient

SBM Offshore  Arcadis NV

Very good diversification

The 3 months correlation between SBM and Arcadis is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Arcadis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadis NV 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 Arcadis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadis NV has no effect on the direction of SBM Offshore i.e., SBM Offshore and Arcadis NV go up and down completely randomly.

Pair Corralation between SBM Offshore and Arcadis NV

Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 1.35 times more return on investment than Arcadis NV. However, SBM Offshore is 1.35 times more volatile than Arcadis NV. It trades about 0.1 of its potential returns per unit of risk. Arcadis NV is currently generating about 0.09 per unit of risk. If you would invest  1,144  in SBM Offshore NV on October 27, 2024 and sell it today you would earn a total of  638.00  from holding SBM Offshore NV or generate 55.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.68%
Values	Daily Returns

SBM Offshore NV  vs.  Arcadis NV

SBM Offshore NV

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SBM Offshore may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Arcadis NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arcadis NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SBM Offshore and Arcadis NV

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

The idea behind SBM Offshore NV and Arcadis NV 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.