Correlation Between Koninklijke BAM and SBM Offshore

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

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

Diversification Opportunities for Koninklijke BAM and SBM Offshore

0.33

Correlation Coefficient

Koninklijke BAM  SBM Offshore

Weak diversification

The 3 months correlation between Koninklijke and SBM is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke BAM Groep 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 Koninklijke BAM 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 Koninklijke BAM Groep 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 Koninklijke BAM i.e., Koninklijke BAM and SBM Offshore go up and down completely randomly.

Pair Corralation between Koninklijke BAM and SBM Offshore

Assuming the 90 days trading horizon Koninklijke BAM Groep is expected to generate 1.11 times more return on investment than SBM Offshore. However, Koninklijke BAM is 1.11 times more volatile than SBM Offshore NV. It trades about -0.04 of its potential returns per unit of risk. SBM Offshore NV is currently generating about -0.11 per unit of risk. If you would invest  416.00  in Koninklijke BAM Groep on September 13, 2024 and sell it today you would lose (6.00) from holding Koninklijke BAM Groep or give up 1.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Koninklijke BAM Groep  vs.  SBM Offshore NV

Koninklijke BAM Groep

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke BAM Groep are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Koninklijke BAM sustained solid returns over the last few months and may actually be approaching a breakup point.

SBM Offshore NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SBM Offshore is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Koninklijke BAM and SBM Offshore

The main advantage of trading using opposite Koninklijke BAM and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke BAM 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 Koninklijke BAM Groep 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.