Correlation Between SBM Offshore and Afya

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

Diversification Opportunities for SBM Offshore and Afya

0.48

Correlation Coefficient

SBM Offshore  Afya

Very weak diversification

The 3 months correlation between SBM and Afya is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya 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 Afya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afya has no effect on the direction of SBM Offshore i.e., SBM Offshore and Afya go up and down completely randomly.

Pair Corralation between SBM Offshore and Afya

Assuming the 90 days horizon SBM Offshore NV is expected to under-perform the Afya. But the pink sheet apears to be less risky and, when comparing its historical volatility, SBM Offshore NV is 1.0 times less risky than Afya. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Afya is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,616  in Afya on September 22, 2024 and sell it today you would lose (66.00) from holding Afya or give up 4.08% of portfolio value over 90 days.

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

SBM Offshore NV  vs.  Afya

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM Offshore NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Afya is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SBM Offshore and Afya

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

The idea behind SBM Offshore NV and Afya 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.