Correlation Between SD Standard and Byggma

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

Diversification Opportunities for SD Standard and Byggma

-0.6

Correlation Coefficient

SD Standard  Byggma

Excellent diversification

The 3 months correlation between SDSD and Byggma is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding SD Standard Drilling and Byggma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byggma 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 Byggma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byggma has no effect on the direction of SD Standard i.e., SD Standard and Byggma go up and down completely randomly.

Pair Corralation between SD Standard and Byggma

Assuming the 90 days trading horizon SD Standard is expected to generate 10.74 times less return on investment than Byggma. But when comparing it to its historical volatility, SD Standard Drilling is 3.24 times less risky than Byggma. It trades about 0.0 of its potential returns per unit of risk. Byggma is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,505  in Byggma on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Byggma or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

SD Standard Drilling  vs.  Byggma

SD Standard Drilling

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SD Standard Drilling are ranked lower than 7 (%) 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 current stock price mess, may contribute to short-term losses for the institutional investors.

Byggma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Byggma 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 Byggma

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

The idea behind SD Standard Drilling and Byggma 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.