Correlation Between Team Internet and SBM Offshore

Can any of the company-specific risk be diversified away by investing in both Team Internet and SBM Offshore 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 Team Internet and SBM Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Team Internet Group and SBM Offshore NV, you can compare the effects of market volatilities on Team Internet and SBM Offshore 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 Team Internet with a short position of SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Team Internet and SBM Offshore.

Diversification Opportunities for Team Internet and SBM Offshore

-0.5

Correlation Coefficient

Team Internet  SBM Offshore

Very good diversification

The 3 months correlation between Team and SBM is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Team Internet Group and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV and Team Internet 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 Team Internet Group are associated (or correlated) with SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of Team Internet i.e., Team Internet and SBM Offshore go up and down completely randomly.

Pair Corralation between Team Internet and SBM Offshore

Assuming the 90 days trading horizon Team Internet Group is expected to under-perform the SBM Offshore. In addition to that, Team Internet is 3.4 times more volatile than SBM Offshore NV. It trades about -0.02 of its total potential returns per unit of risk. SBM Offshore NV is currently generating about 0.14 per unit of volatility. If you would invest  1,676  in SBM Offshore NV on December 21, 2024 and sell it today you would earn a total of  324.00  from holding SBM Offshore NV or generate 19.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Team Internet Group  vs.  SBM Offshore NV

Team Internet Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Team Internet Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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. Despite quite uncertain essential indicators, SBM Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Team Internet and SBM Offshore

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

The idea behind Team Internet Group and SBM Offshore 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.