Correlation Between SBM Offshore and PostNL NV

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

Diversification Opportunities for SBM Offshore and PostNL NV

-0.11

Correlation Coefficient

SBM Offshore  PostNL NV

Good diversification

The 3 months correlation between SBM and PostNL is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and PostNL NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PostNL 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 PostNL NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PostNL NV has no effect on the direction of SBM Offshore i.e., SBM Offshore and PostNL NV go up and down completely randomly.

Pair Corralation between SBM Offshore and PostNL NV

Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 1.1 times more return on investment than PostNL NV. However, SBM Offshore is 1.1 times more volatile than PostNL NV. It trades about 0.15 of its potential returns per unit of risk. PostNL NV is currently generating about -0.03 per unit of risk. If you would invest  1,681  in SBM Offshore NV on December 29, 2024 and sell it today you would earn a total of  351.00  from holding SBM Offshore NV or generate 20.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SBM Offshore NV  vs.  PostNL NV

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 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SBM Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

PostNL NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days PostNL NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, PostNL NV is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SBM Offshore and PostNL NV

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

The idea behind SBM Offshore NV and PostNL 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.