Correlation Between SD Standard and North Energy
Can any of the company-specific risk be diversified away by investing in both SD Standard and North Energy 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 SD Standard and North Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SD Standard Drilling and North Energy ASA, you can compare the effects of market volatilities on SD Standard and North Energy 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 SD Standard with a short position of North Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SD Standard and North Energy.
Diversification Opportunities for SD Standard and North Energy
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SDSD and North is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SD Standard Drilling and North Energy ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Energy ASA and SD Standard 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 SD Standard Drilling are associated (or correlated) with North Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Energy ASA has no effect on the direction of SD Standard i.e., SD Standard and North Energy go up and down completely randomly.
Pair Corralation between SD Standard and North Energy
Assuming the 90 days trading horizon SD Standard is expected to generate 2.96 times less return on investment than North Energy. But when comparing it to its historical volatility, SD Standard Drilling is 2.29 times less risky than North Energy. It trades about 0.04 of its potential returns per unit of risk. North Energy ASA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 206.00 in North Energy ASA on November 9, 2024 and sell it today you would earn a total of 62.00 from holding North Energy ASA or generate 30.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SD Standard Drilling vs. North Energy ASA
Performance |
| Timeline |
| SD Standard Drilling |
| North Energy ASA |
SD Standard and North Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SD Standard and North Energy
The main advantage of trading using opposite SD Standard and North Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SD Standard position performs unexpectedly, North Energy 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 North Energy will offset losses from the drop in North Energy's long position.| SD Standard vs. Odfjell Drilling | SD Standard vs. Solstad Offsho | SD Standard vs. Reach Subsea | SD Standard vs. Eidesvik Offshore ASA |
| North Energy vs. Melhus Sparebank | North Energy vs. Sparebank 1 SMN | North Energy vs. Sunndal Sparebank | North Energy vs. Arcticzymes Technologies 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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