Correlation Between Oatly Group and Seadrill

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

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

Diversification Opportunities for Oatly Group and Seadrill

-0.05

Correlation Coefficient

Oatly Group  Seadrill

Good diversification

The 3 months correlation between Oatly and Seadrill is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Oatly Group AB and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Oatly Group 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 Oatly Group AB 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 Oatly Group i.e., Oatly Group and Seadrill go up and down completely randomly.

Pair Corralation between Oatly Group and Seadrill

Given the investment horizon of 90 days Oatly Group AB is expected to under-perform the Seadrill. In addition to that, Oatly Group is 1.92 times more volatile than Seadrill Limited. It trades about -0.05 of its total potential returns per unit of risk. Seadrill Limited is currently generating about 0.01 per unit of volatility. If you would invest  3,858  in Seadrill Limited on September 12, 2024 and sell it today you would earn a total of  18.00  from holding Seadrill Limited or generate 0.47% return on investment over 90 days.

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

Oatly Group AB  vs.  Seadrill Limited

Oatly Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oatly Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Seadrill Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 1 (%) 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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Oatly Group and Seadrill

The main advantage of trading using opposite Oatly Group and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oatly Group 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 Oatly Group AB 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.