Correlation Between Awilco Drilling and Transocean

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

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

Diversification Opportunities for Awilco Drilling and Transocean

0.15

Correlation Coefficient

Awilco Drilling  Transocean

Average diversification

The 3 months correlation between Awilco and Transocean is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Awilco Drilling PLC and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Awilco Drilling 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 Awilco Drilling PLC are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Awilco Drilling i.e., Awilco Drilling and Transocean go up and down completely randomly.

Pair Corralation between Awilco Drilling and Transocean

Assuming the 90 days horizon Awilco Drilling PLC is expected to generate 0.99 times more return on investment than Transocean. However, Awilco Drilling PLC is 1.01 times less risky than Transocean. It trades about 0.08 of its potential returns per unit of risk. Transocean is currently generating about -0.05 per unit of risk. If you would invest  146.00  in Awilco Drilling PLC on September 13, 2024 and sell it today you would earn a total of  46.00  from holding Awilco Drilling PLC or generate 31.51% return on investment over 90 days.

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

Awilco Drilling PLC  vs.  Transocean

Awilco Drilling PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Awilco Drilling and Transocean

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

The idea behind Awilco Drilling PLC and Transocean 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.