Correlation Between SD Standard and Multiconsult

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

Diversification Opportunities for SD Standard and Multiconsult

0.83

Correlation Coefficient

SD Standard  Multiconsult

Very poor diversification

The 3 months correlation between SDSD and Multiconsult is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SD Standard Drilling and Multiconsult AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multiconsult AS 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 Multiconsult. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multiconsult AS has no effect on the direction of SD Standard i.e., SD Standard and Multiconsult go up and down completely randomly.

Pair Corralation between SD Standard and Multiconsult

Assuming the 90 days trading horizon SD Standard is expected to generate 1.39 times less return on investment than Multiconsult. But when comparing it to its historical volatility, SD Standard Drilling is 1.12 times less risky than Multiconsult. It trades about 0.09 of its potential returns per unit of risk. Multiconsult AS is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  17,900  in Multiconsult AS on September 25, 2024 and sell it today you would earn a total of  1,400  from holding Multiconsult AS or generate 7.82% return on investment over 90 days.

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

SD Standard Drilling  vs.  Multiconsult AS

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Multiconsult AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multiconsult AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Multiconsult may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SD Standard and Multiconsult

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

The idea behind SD Standard Drilling and Multiconsult 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.