Correlation Between SD Standard and Nordhealth

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

Diversification Opportunities for SD Standard and Nordhealth

0.44

Correlation Coefficient

SD Standard  Nordhealth

Very weak diversification

The 3 months correlation between SDSD and Nordhealth is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding SD Standard Drilling and Nordhealth AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordhealth 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 Nordhealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordhealth AS has no effect on the direction of SD Standard i.e., SD Standard and Nordhealth go up and down completely randomly.

Pair Corralation between SD Standard and Nordhealth

Assuming the 90 days trading horizon SD Standard is expected to generate 4.49 times less return on investment than Nordhealth. But when comparing it to its historical volatility, SD Standard Drilling is 5.44 times less risky than Nordhealth. It trades about 0.09 of its potential returns per unit of risk. Nordhealth AS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,500  in Nordhealth AS on September 14, 2024 and sell it today you would earn a total of  600.00  from holding Nordhealth AS or generate 17.14% return on investment over 90 days.

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

SD Standard Drilling  vs.  Nordhealth 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.

Nordhealth AS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordhealth AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Nordhealth displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SD Standard and Nordhealth

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

The idea behind SD Standard Drilling and Nordhealth 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.