Correlation Between Sovereign Metals and SBM Offshore

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

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

Diversification Opportunities for Sovereign Metals and SBM Offshore

0.24

Correlation Coefficient

Sovereign Metals  SBM Offshore

Modest diversification

The 3 months correlation between Sovereign and SBM is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals i.e., Sovereign Metals and SBM Offshore go up and down completely randomly.

Pair Corralation between Sovereign Metals and SBM Offshore

Assuming the 90 days trading horizon Sovereign Metals is expected to generate 8.02 times less return on investment than SBM Offshore. In addition to that, Sovereign Metals is 1.44 times more volatile than SBM Offshore NV. It trades about 0.03 of its total potential returns per unit of risk. SBM Offshore NV is currently generating about 0.38 per unit of volatility. If you would invest  1,711  in SBM Offshore NV on April 21, 2025 and sell it today you would earn a total of  592.00  from holding SBM Offshore NV or generate 34.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Sovereign Metals  vs.  SBM Offshore NV

Sovereign Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sovereign Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 30 (%) 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.

Pair Trading with Sovereign Metals and SBM Offshore

The main advantage of trading using opposite Sovereign Metals and SBM Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sovereign Metals 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 Sovereign Metals 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.

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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.