Correlation Between SD Standard and Frontline

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

Diversification Opportunities for SD Standard and Frontline

-0.37

Correlation Coefficient

SD Standard  Frontline

Very good diversification

The 3 months correlation between SDSD and Frontline is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding SD Standard Drilling and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline 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 Frontline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontline has no effect on the direction of SD Standard i.e., SD Standard and Frontline go up and down completely randomly.

Pair Corralation between SD Standard and Frontline

Assuming the 90 days trading horizon SD Standard Drilling is expected to under-perform the Frontline. But the stock apears to be less risky and, when comparing its historical volatility, SD Standard Drilling is 3.07 times less risky than Frontline. The stock trades about -0.06 of its potential returns per unit of risk. The Frontline is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  16,401  in Frontline on April 24, 2025 and sell it today you would earn a total of  2,759  from holding Frontline or generate 16.82% return on investment over 90 days.

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

SD Standard Drilling  vs.  Frontline

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Frontline

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frontline are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Frontline disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SD Standard and Frontline

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

The idea behind SD Standard Drilling and Frontline 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.