Correlation Between Computer Modelling and Seadrill

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

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

Diversification Opportunities for Computer Modelling and Seadrill

-0.4

Correlation Coefficient

Computer Modelling  Seadrill

Very good diversification

The 3 months correlation between Computer and Seadrill is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Computer Modelling Group and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Computer Modelling 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 Computer Modelling Group 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 Computer Modelling i.e., Computer Modelling and Seadrill go up and down completely randomly.

Pair Corralation between Computer Modelling and Seadrill

Assuming the 90 days horizon Computer Modelling Group is expected to under-perform the Seadrill. In addition to that, Computer Modelling is 1.01 times more volatile than Seadrill Limited. It trades about -0.07 of its total potential returns per unit of risk. Seadrill Limited is currently generating about 0.03 per unit of volatility. If you would invest  3,899  in Seadrill Limited on September 13, 2024 and sell it today you would earn a total of  97.00  from holding Seadrill Limited or generate 2.49% return on investment over 90 days.

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

Computer Modelling Group  vs.  Seadrill Limited

Computer Modelling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Modelling Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Seadrill Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Seadrill is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Computer Modelling and Seadrill

The main advantage of trading using opposite Computer Modelling and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computer Modelling 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 Computer Modelling Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.