Correlation Between SBM Offshore and Wolford Aktiengesellscha

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

Diversification Opportunities for SBM Offshore and Wolford Aktiengesellscha

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between SBM and Wolford is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Wolford Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolford Aktiengesellscha 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 Wolford Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolford Aktiengesellscha has no effect on the direction of SBM Offshore i.e., SBM Offshore and Wolford Aktiengesellscha go up and down completely randomly.

Pair Corralation between SBM Offshore and Wolford Aktiengesellscha

Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 0.58 times more return on investment than Wolford Aktiengesellscha. However, SBM Offshore NV is 1.72 times less risky than Wolford Aktiengesellscha. It trades about 0.07 of its potential returns per unit of risk. Wolford Aktiengesellschaft is currently generating about -0.05 per unit of risk. If you would invest  1,220  in SBM Offshore NV on August 27, 2024 and sell it today you would earn a total of  558.00  from holding SBM Offshore NV or generate 45.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

SBM Offshore NV  vs.  Wolford Aktiengesellschaft

 Performance 
       Timeline  
SBM Offshore NV 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, SBM Offshore is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
Wolford Aktiengesellscha 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Wolford Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

SBM Offshore and Wolford Aktiengesellscha Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SBM Offshore and Wolford Aktiengesellscha

The main advantage of trading using opposite SBM Offshore and Wolford Aktiengesellscha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore position performs unexpectedly, Wolford Aktiengesellscha 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 Wolford Aktiengesellscha will offset losses from the drop in Wolford Aktiengesellscha's long position.
The idea behind SBM Offshore NV and Wolford Aktiengesellschaft 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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