Correlation Between SBM Offshore and EVN AG

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

Diversification Opportunities for SBM Offshore and EVN AG

-0.06

Correlation Coefficient

SBM Offshore  EVN AG

Good diversification

The 3 months correlation between SBM and EVN is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and EVN AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVN AG 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 EVN AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVN AG has no effect on the direction of SBM Offshore i.e., SBM Offshore and EVN AG go up and down completely randomly.

Pair Corralation between SBM Offshore and EVN AG

Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 1.4 times more return on investment than EVN AG. However, SBM Offshore is 1.4 times more volatile than EVN AG. It trades about 0.16 of its potential returns per unit of risk. EVN AG is currently generating about -0.01 per unit of risk. If you would invest  1,689  in SBM Offshore NV on December 28, 2024 and sell it today you would earn a total of  349.00  from holding SBM Offshore NV or generate 20.66% 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.  EVN AG

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. Despite fairly inconsistent forward indicators, SBM Offshore demonstrated solid returns over the last few months and may actually be approaching a breakup point.

EVN AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days EVN AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, EVN AG is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SBM Offshore and EVN AG

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

The idea behind SBM Offshore NV and EVN AG 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.