Correlation Between SD Standard and Nordic Technology

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

Diversification Opportunities for SD Standard and Nordic Technology

-0.44

Correlation Coefficient

SD Standard  Nordic Technology

Very good diversification

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

Pair Corralation between SD Standard and Nordic Technology

Assuming the 90 days trading horizon SD Standard Drilling is expected to generate 0.33 times more return on investment than Nordic Technology. However, SD Standard Drilling is 3.04 times less risky than Nordic Technology. It trades about 0.09 of its potential returns per unit of risk. Nordic Technology Group is currently generating about -0.17 per unit of risk. If you would invest  162.00  in SD Standard Drilling on September 14, 2024 and sell it today you would earn a total of  8.00  from holding SD Standard Drilling or generate 4.94% return on investment over 90 days.

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

SD Standard Drilling  vs.  Nordic Technology Group

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.

Nordic Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental 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 Nordic Technology

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

The idea behind SD Standard Drilling and Nordic Technology Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..