Correlation Between Archer and Seadrill

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

By analyzing existing cross correlation between Archer Limited and Seadrill Limited, you can compare the effects of market volatilities on Archer and Seadrill 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 Archer with a short position of Seadrill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer and Seadrill.

Diversification Opportunities for Archer and Seadrill

-0.39

Correlation Coefficient

Archer  Seadrill

Very good diversification

The 3 months correlation between Archer and Seadrill is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Archer Limited and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Archer 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 Archer Limited are associated (or correlated) with Seadrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seadrill Limited has no effect on the direction of Archer i.e., Archer and Seadrill go up and down completely randomly.

Pair Corralation between Archer and Seadrill

Assuming the 90 days horizon Archer Limited is expected to under-perform the Seadrill. But the pink sheet apears to be less risky and, when comparing its historical volatility, Archer Limited is 3.38 times less risky than Seadrill. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Seadrill Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,978  in Seadrill Limited on September 15, 2024 and sell it today you would lose (126.00) from holding Seadrill Limited or give up 3.17% of portfolio value over 90 days.

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

Archer Limited  vs.  Seadrill Limited

Archer Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archer Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Archer is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Seadrill Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Seadrill is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Archer and Seadrill

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

The idea behind Archer Limited and Seadrill Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.