Correlation Between Natural Gas and SDI Group

Can any of the company-specific risk be diversified away by investing in both Natural Gas and SDI Group 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 Natural Gas and SDI Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Natural Gas Services and SDI Group plc, you can compare the effects of market volatilities on Natural Gas and SDI Group 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 Natural Gas with a short position of SDI Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Gas and SDI Group.

Diversification Opportunities for Natural Gas and SDI Group

0.74

Correlation Coefficient

Natural Gas  SDI Group

Poor diversification

The 3 months correlation between Natural and SDI is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas Services and SDI Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SDI Group plc and Natural Gas 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 Natural Gas Services are associated (or correlated) with SDI Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SDI Group plc has no effect on the direction of Natural Gas i.e., Natural Gas and SDI Group go up and down completely randomly.

Pair Corralation between Natural Gas and SDI Group

Considering the 90-day investment horizon Natural Gas is expected to generate 6.28 times less return on investment than SDI Group. But when comparing it to its historical volatility, Natural Gas Services is 6.13 times less risky than SDI Group. It trades about 0.11 of its potential returns per unit of risk. SDI Group plc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  66.00  in SDI Group plc on July 31, 2025 and sell it today you would earn a total of  55.00  from holding SDI Group plc or generate 83.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Natural Gas Services  vs.  SDI Group plc

Natural Gas Services

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Gas Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Natural Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

SDI Group plc

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in SDI Group plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, SDI Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natural Gas and SDI Group

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

The idea behind Natural Gas Services and SDI Group plc 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.