Correlation Between Flow Traders and SBM Offshore

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

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

Diversification Opportunities for Flow Traders and SBM Offshore

0.75

Correlation Coefficient

Flow Traders  SBM Offshore

Poor diversification

The 3 months correlation between Flow and SBM is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Flow Traders BV 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 Flow Traders 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 Flow Traders BV 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 Flow Traders i.e., Flow Traders and SBM Offshore go up and down completely randomly.

Pair Corralation between Flow Traders and SBM Offshore

Assuming the 90 days trading horizon Flow Traders BV is expected to generate 1.06 times more return on investment than SBM Offshore. However, Flow Traders is 1.06 times more volatile than SBM Offshore NV. It trades about 0.21 of its potential returns per unit of risk. SBM Offshore NV is currently generating about 0.03 per unit of risk. If you would invest  1,743  in Flow Traders BV on September 4, 2024 and sell it today you would earn a total of  347.00  from holding Flow Traders BV or generate 19.91% return on investment over 90 days.

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

Flow Traders BV  vs.  SBM Offshore NV

Flow Traders BV

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flow Traders BV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flow Traders unveiled solid returns over the last few months and may actually be approaching a breakup point.

SBM Offshore NV

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 2 (%) 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 Flow Traders and SBM Offshore

The main advantage of trading using opposite Flow Traders and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flow Traders 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 Flow Traders BV 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.