Correlation Between SD Standard and Arctic Bioscience

Can any of the company-specific risk be diversified away by investing in both SD Standard and Arctic Bioscience 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 Arctic Bioscience 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 Arctic Bioscience AS, you can compare the effects of market volatilities on SD Standard and Arctic Bioscience 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 Arctic Bioscience. Check out your portfolio center. Please also check ongoing floating volatility patterns of SD Standard and Arctic Bioscience.

Diversification Opportunities for SD Standard and Arctic Bioscience

-0.88

Correlation Coefficient

SD Standard  Arctic Bioscience

Pay attention - limited upside

The 3 months correlation between SDSD and Arctic is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding SD Standard Drilling and Arctic Bioscience AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Bioscience 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 Arctic Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Bioscience has no effect on the direction of SD Standard i.e., SD Standard and Arctic Bioscience go up and down completely randomly.

Pair Corralation between SD Standard and Arctic Bioscience

Assuming the 90 days trading horizon SD Standard Drilling is expected to generate 0.06 times more return on investment than Arctic Bioscience. However, SD Standard Drilling is 16.08 times less risky than Arctic Bioscience. It trades about 0.1 of its potential returns per unit of risk. Arctic Bioscience AS is currently generating about -0.1 per unit of risk. If you would invest  161.00  in SD Standard Drilling on September 13, 2024 and sell it today you would earn a total of  9.00  from holding SD Standard Drilling or generate 5.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

SD Standard Drilling  vs.  Arctic Bioscience AS

SD Standard Drilling

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SD Standard Drilling are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, SD Standard is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Arctic Bioscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arctic Bioscience AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with SD Standard and Arctic Bioscience

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

The idea behind SD Standard Drilling and Arctic Bioscience AS 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.