Correlation Between Borr Drilling and Archer

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

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

Diversification Opportunities for Borr Drilling and Archer

0.86

Correlation Coefficient

Borr Drilling  Archer

Very poor diversification

The 3 months correlation between Borr and Archer is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Borr Drilling and Archer Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Limited and Borr 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 Borr Drilling are associated (or correlated) with Archer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Limited has no effect on the direction of Borr Drilling i.e., Borr Drilling and Archer go up and down completely randomly.

Pair Corralation between Borr Drilling and Archer

Given the investment horizon of 90 days Borr Drilling is expected to under-perform the Archer. In addition to that, Borr Drilling is 4.24 times more volatile than Archer Limited. It trades about -0.18 of its total potential returns per unit of risk. Archer Limited is currently generating about -0.09 per unit of volatility. If you would invest  220.00  in Archer Limited on September 15, 2024 and sell it today you would lose (10.00) from holding Archer Limited or give up 4.55% of portfolio value over 90 days.

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

Borr Drilling  vs.  Archer Limited

Borr Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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.

Pair Trading with Borr Drilling and Archer

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

The idea behind Borr Drilling and Archer 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.