Correlation Between SBM Offshore and Alfa Financial

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

Diversification Opportunities for SBM Offshore and Alfa Financial

0.51

Correlation Coefficient

SBM Offshore  Alfa Financial

Very weak diversification

The 3 months correlation between SBM and Alfa is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software 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 Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of SBM Offshore i.e., SBM Offshore and Alfa Financial go up and down completely randomly.

Pair Corralation between SBM Offshore and Alfa Financial

Assuming the 90 days trading horizon SBM Offshore NV is expected to generate 0.91 times more return on investment than Alfa Financial. However, SBM Offshore NV is 1.1 times less risky than Alfa Financial. It trades about 0.2 of its potential returns per unit of risk. Alfa Financial Software is currently generating about -0.26 per unit of risk. If you would invest  2,136  in SBM Offshore NV on April 5, 2025 and sell it today you would earn a total of  110.00  from holding SBM Offshore NV or generate 5.15% return on investment over 90 days.

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

SBM Offshore NV  vs.  Alfa Financial Software

SBM Offshore NV

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SBM Offshore NV are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, SBM Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Alfa Financial Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alfa Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBM Offshore and Alfa Financial

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

The idea behind SBM Offshore NV and Alfa Financial Software 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.