Correlation Between SBM Offshore and Wolters Kluwer

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

Diversification Opportunities for SBM Offshore and Wolters Kluwer

-0.13

Correlation Coefficient

SBM Offshore  Wolters Kluwer

Good diversification

The 3 months correlation between SBM and Wolters is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Wolters Kluwer NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolters Kluwer NV 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 Wolters Kluwer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolters Kluwer NV has no effect on the direction of SBM Offshore i.e., SBM Offshore and Wolters Kluwer go up and down completely randomly.

Pair Corralation between SBM Offshore and Wolters Kluwer

Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 1.04 times more return on investment than Wolters Kluwer. However, SBM Offshore is 1.04 times more volatile than Wolters Kluwer NV. It trades about 0.02 of its potential returns per unit of risk. Wolters Kluwer NV is currently generating about 0.02 per unit of risk. If you would invest  1,646  in SBM Offshore NV on September 23, 2024 and sell it today you would earn a total of  24.00  from holding SBM Offshore NV or generate 1.46% return on investment over 90 days.

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

SBM Offshore NV  vs.  Wolters Kluwer NV

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days SBM Offshore NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, SBM Offshore is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Wolters Kluwer NV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wolters Kluwer NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, Wolters Kluwer is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SBM Offshore and Wolters Kluwer

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

The idea behind SBM Offshore NV and Wolters Kluwer 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.