Correlation Between EAM Solar and SD Standard
Can any of the company-specific risk be diversified away by investing in both EAM Solar and SD Standard 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 EAM Solar and SD Standard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EAM Solar ASA and SD Standard Drilling, you can compare the effects of market volatilities on EAM Solar and SD Standard 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 EAM Solar with a short position of SD Standard. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAM Solar and SD Standard.
Diversification Opportunities for EAM Solar and SD Standard
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EAM and SDSD is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding EAM Solar ASA and SD Standard Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SD Standard Drilling and EAM Solar 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 EAM Solar ASA are associated (or correlated) with SD Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SD Standard Drilling has no effect on the direction of EAM Solar i.e., EAM Solar and SD Standard go up and down completely randomly.
Pair Corralation between EAM Solar and SD Standard
Assuming the 90 days trading horizon EAM Solar ASA is expected to generate 29.25 times more return on investment than SD Standard. However, EAM Solar is 29.25 times more volatile than SD Standard Drilling. It trades about 0.05 of its potential returns per unit of risk. SD Standard Drilling is currently generating about 0.01 per unit of risk. If you would invest 586.00 in EAM Solar ASA on September 14, 2024 and sell it today you would lose (570.00) from holding EAM Solar ASA or give up 97.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EAM Solar ASA vs. SD Standard Drilling
Performance |
| Timeline |
| EAM Solar ASA |
| SD Standard Drilling |
EAM Solar and SD Standard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EAM Solar and SD Standard
The main advantage of trading using opposite EAM Solar and SD Standard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAM Solar position performs unexpectedly, SD Standard 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 SD Standard will offset losses from the drop in SD Standard's long position.| EAM Solar vs. SD Standard Drilling | EAM Solar vs. Clean Seas Seafood | EAM Solar vs. Shelf Drilling | EAM Solar vs. Arcticzymes Technologies ASA |
| SD Standard vs. Odfjell Drilling | SD Standard vs. Solstad Offsho | SD Standard vs. Reach Subsea | SD Standard vs. Eidesvik Offshore ASA |
Check out your portfolio center.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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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