Correlation Between SD Standard and Schibsted ASA

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

Diversification Opportunities for SD Standard and Schibsted ASA

0.81

Correlation Coefficient

SD Standard  Schibsted ASA

Very poor diversification

The 3 months correlation between SDSD and Schibsted is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SD Standard Drilling and Schibsted ASA B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schibsted ASA B 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 Schibsted ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schibsted ASA B has no effect on the direction of SD Standard i.e., SD Standard and Schibsted ASA go up and down completely randomly.

Pair Corralation between SD Standard and Schibsted ASA

Assuming the 90 days trading horizon SD Standard is expected to generate 1.42 times less return on investment than Schibsted ASA. But when comparing it to its historical volatility, SD Standard Drilling is 1.95 times less risky than Schibsted ASA. It trades about 0.06 of its potential returns per unit of risk. Schibsted ASA B is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  31,820  in Schibsted ASA B on September 29, 2024 and sell it today you would earn a total of  1,480  from holding Schibsted ASA B or generate 4.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

SD Standard Drilling  vs.  Schibsted ASA B

SD Standard Drilling

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SD Standard Drilling are ranked lower than 5 (%) 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.

Schibsted ASA B

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schibsted ASA B are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Schibsted ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SD Standard and Schibsted ASA

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

The idea behind SD Standard Drilling and Schibsted ASA B 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.