Correlation Between Northern Ocean and SD Standard
Can any of the company-specific risk be diversified away by investing in both Northern Ocean 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 Northern Ocean and SD Standard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Ocean and SD Standard Drilling, you can compare the effects of market volatilities on Northern Ocean 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 Northern Ocean with a short position of SD Standard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Ocean and SD Standard.
Diversification Opportunities for Northern Ocean and SD Standard
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and SDSD is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Northern Ocean 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 Northern Ocean 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 Northern Ocean 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 Northern Ocean i.e., Northern Ocean and SD Standard go up and down completely randomly.
Pair Corralation between Northern Ocean and SD Standard
Assuming the 90 days trading horizon Northern Ocean is expected to generate 6.56 times more return on investment than SD Standard. However, Northern Ocean is 6.56 times more volatile than SD Standard Drilling. It trades about 0.11 of its potential returns per unit of risk. SD Standard Drilling is currently generating about 0.1 per unit of risk. If you would invest 774.00 in Northern Ocean on August 29, 2024 and sell it today you would earn a total of 64.00 from holding Northern Ocean or generate 8.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Northern Ocean vs. SD Standard Drilling
Performance |
| Timeline |
| Northern Ocean |
| SD Standard Drilling |
Northern Ocean and SD Standard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Ocean and SD Standard
The main advantage of trading using opposite Northern Ocean and SD Standard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Ocean 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.| Northern Ocean vs. Odfjell Drilling | Northern Ocean vs. Shelf Drilling | Northern Ocean vs. Deep Value Driller | Northern Ocean vs. Borr Drilling |
| 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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