Correlation Between SBM Offshore and Fuchs Petrolub

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

Diversification Opportunities for SBM Offshore and Fuchs Petrolub

0.75

Correlation Coefficient

SBM Offshore  Fuchs Petrolub

Poor diversification

The 3 months correlation between SBM and Fuchs is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Fuchs Petrolub SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuchs Petrolub SE 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 Fuchs Petrolub. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuchs Petrolub SE has no effect on the direction of SBM Offshore i.e., SBM Offshore and Fuchs Petrolub go up and down completely randomly.

Pair Corralation between SBM Offshore and Fuchs Petrolub

Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 0.79 times more return on investment than Fuchs Petrolub. However, SBM Offshore NV is 1.26 times less risky than Fuchs Petrolub. It trades about -0.1 of its potential returns per unit of risk. Fuchs Petrolub SE is currently generating about -0.12 per unit of risk. If you would invest  1,731  in SBM Offshore NV on September 14, 2024 and sell it today you would lose (45.00) from holding SBM Offshore NV or give up 2.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

SBM Offshore NV  vs.  Fuchs Petrolub SE

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. 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.

Fuchs Petrolub SE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fuchs Petrolub SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Fuchs Petrolub may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SBM Offshore and Fuchs Petrolub

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

The idea behind SBM Offshore NV and Fuchs Petrolub SE 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.