Correlation Between SD Standard and Equinor ASA

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

Diversification Opportunities for SD Standard and Equinor ASA

-0.59

Correlation Coefficient

SD Standard  Equinor ASA

Excellent diversification

The 3 months correlation between SDSD and Equinor is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding SD Standard Drilling and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA 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 Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA has no effect on the direction of SD Standard i.e., SD Standard and Equinor ASA go up and down completely randomly.

Pair Corralation between SD Standard and Equinor ASA

Assuming the 90 days trading horizon SD Standard Drilling is expected to under-perform the Equinor ASA. But the stock apears to be less risky and, when comparing its historical volatility, SD Standard Drilling is 1.95 times less risky than Equinor ASA. The stock trades about -0.05 of its potential returns per unit of risk. The Equinor ASA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  23,539  in Equinor ASA on April 24, 2025 and sell it today you would earn a total of  2,601  from holding Equinor ASA or generate 11.05% 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.  Equinor ASA

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.

Equinor ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equinor ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Equinor ASA may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with SD Standard and Equinor ASA

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

The idea behind SD Standard Drilling and Equinor ASA 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.