Correlation Between Peyto ExplorationDevel and Seadrill

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

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

Diversification Opportunities for Peyto ExplorationDevel and Seadrill

0.21

Correlation Coefficient

Peyto ExplorationDevel  Seadrill

Modest diversification

The 3 months correlation between Peyto and Seadrill is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Peyto ExplorationDevelopment C and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Peyto ExplorationDevel 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 Peyto ExplorationDevelopment Corp 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 Peyto ExplorationDevel i.e., Peyto ExplorationDevel and Seadrill go up and down completely randomly.

Pair Corralation between Peyto ExplorationDevel and Seadrill

Assuming the 90 days horizon Peyto ExplorationDevelopment Corp is expected to generate 0.62 times more return on investment than Seadrill. However, Peyto ExplorationDevelopment Corp is 1.62 times less risky than Seadrill. It trades about 0.13 of its potential returns per unit of risk. Seadrill Limited is currently generating about 0.02 per unit of risk. If you would invest  1,021  in Peyto ExplorationDevelopment Corp on September 5, 2024 and sell it today you would earn a total of  127.00  from holding Peyto ExplorationDevelopment Corp or generate 12.44% return on investment over 90 days.

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

Peyto ExplorationDevelopment C  vs.  Seadrill Limited

Peyto ExplorationDevel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peyto ExplorationDevelopment Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Peyto ExplorationDevel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Peyto ExplorationDevel and Seadrill

The main advantage of trading using opposite Peyto ExplorationDevel and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peyto ExplorationDevel 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 Peyto ExplorationDevelopment Corp 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.