Correlation Between SD Standard and Sea1 Offshore

Can any of the company-specific risk be diversified away by investing in both SD Standard and Sea1 Offshore 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 Sea1 Offshore 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 Sea1 Offshore, you can compare the effects of market volatilities on SD Standard and Sea1 Offshore 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 Sea1 Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of SD Standard and Sea1 Offshore.

Diversification Opportunities for SD Standard and Sea1 Offshore

-0.53

Correlation Coefficient

SD Standard  Sea1 Offshore

Excellent diversification

The 3 months correlation between SDSD and Sea1 is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding SD Standard Drilling and Sea1 Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea1 Offshore 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 Sea1 Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea1 Offshore has no effect on the direction of SD Standard i.e., SD Standard and Sea1 Offshore go up and down completely randomly.

Pair Corralation between SD Standard and Sea1 Offshore

Assuming the 90 days trading horizon SD Standard is expected to generate 1.27 times less return on investment than Sea1 Offshore. But when comparing it to its historical volatility, SD Standard Drilling is 4.3 times less risky than Sea1 Offshore. It trades about 0.19 of its potential returns per unit of risk. Sea1 Offshore is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,896  in Sea1 Offshore on December 28, 2024 and sell it today you would earn a total of  184.00  from holding Sea1 Offshore or generate 9.7% 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.  Sea1 Offshore

SD Standard Drilling

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SD Standard Drilling are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, SD Standard may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sea1 Offshore

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sea1 Offshore are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sea1 Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SD Standard and Sea1 Offshore

The main advantage of trading using opposite SD Standard and Sea1 Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SD Standard position performs unexpectedly, Sea1 Offshore 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 Sea1 Offshore will offset losses from the drop in Sea1 Offshore's long position.

The idea behind SD Standard Drilling and Sea1 Offshore 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.