Correlation Between SD Standard and American Shipping

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

Diversification Opportunities for SD Standard and American Shipping

0.66

Correlation Coefficient

SD Standard  American Shipping

Poor diversification

The 3 months correlation between SDSD and American is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SD Standard Drilling and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping 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 American Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shipping has no effect on the direction of SD Standard i.e., SD Standard and American Shipping go up and down completely randomly.

Pair Corralation between SD Standard and American Shipping

Assuming the 90 days trading horizon SD Standard Drilling is expected to generate 0.07 times more return on investment than American Shipping. However, SD Standard Drilling is 13.7 times less risky than American Shipping. It trades about -0.06 of its potential returns per unit of risk. American Shipping is currently generating about -0.11 per unit of risk. If you would invest  189.00  in SD Standard Drilling on April 24, 2025 and sell it today you would lose (7.00) from holding SD Standard Drilling or give up 3.7% of portfolio value over 90 days.

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

SD Standard Drilling  vs.  American Shipping

SD Standard Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days SD Standard Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

American Shipping

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in August 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 American Shipping

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

The idea behind SD Standard Drilling and American Shipping 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.