Correlation Between Mid Atlantic and Seadrill

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

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

Diversification Opportunities for Mid Atlantic and Seadrill

0.0

Correlation Coefficient

Mid Atlantic  Seadrill

Pay attention - limited upside

The 3 months correlation between Mid and Seadrill is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mid Atlantic Home Health and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Mid Atlantic 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 Mid Atlantic Home Health 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 Mid Atlantic i.e., Mid Atlantic and Seadrill go up and down completely randomly.

Pair Corralation between Mid Atlantic and Seadrill

Given the investment horizon of 90 days Mid Atlantic Home Health is expected to under-perform the Seadrill. In addition to that, Mid Atlantic is 2.08 times more volatile than Seadrill Limited. It trades about -0.06 of its total potential returns per unit of risk. Seadrill Limited is currently generating about 0.02 per unit of volatility. If you would invest  3,311  in Seadrill Limited on September 30, 2024 and sell it today you would earn a total of  349.00  from holding Seadrill Limited or generate 10.54% return on investment over 90 days.

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

Mid Atlantic Home Health  vs.  Seadrill Limited

Mid Atlantic Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mid Atlantic Home Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Mid Atlantic is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Mid Atlantic and Seadrill

The main advantage of trading using opposite Mid Atlantic and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Atlantic 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 Mid Atlantic Home Health 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.