Correlation Between Borr Drilling and Cathedral Energy

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

By analyzing existing cross correlation between Borr Drilling and Cathedral Energy Services, you can compare the effects of market volatilities on Borr Drilling and Cathedral Energy 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 Cathedral Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Borr Drilling and Cathedral Energy.

Diversification Opportunities for Borr Drilling and Cathedral Energy

-0.61

Correlation Coefficient

Borr Drilling  Cathedral Energy

Excellent diversification

The 3 months correlation between Borr and Cathedral is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Borr Drilling and Cathedral Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathedral Energy Services 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 Cathedral Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathedral Energy Services has no effect on the direction of Borr Drilling i.e., Borr Drilling and Cathedral Energy go up and down completely randomly.

Pair Corralation between Borr Drilling and Cathedral Energy

Given the investment horizon of 90 days Borr Drilling is expected to under-perform the Cathedral Energy. In addition to that, Borr Drilling is 1.41 times more volatile than Cathedral Energy Services. It trades about -0.11 of its total potential returns per unit of risk. Cathedral Energy Services is currently generating about 0.01 per unit of volatility. If you would invest  455.00  in Cathedral Energy Services on September 14, 2024 and sell it today you would lose (4.00) from holding Cathedral Energy Services or give up 0.88% of portfolio value over 90 days.

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

Borr Drilling  vs.  Cathedral Energy Services

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.

Cathedral Energy Services

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cathedral Energy Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Cathedral Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Borr Drilling and Cathedral Energy

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

The idea behind Borr Drilling and Cathedral Energy Services 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.