Correlation Between Seadrill and CDW Corp

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

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

Diversification Opportunities for Seadrill and CDW Corp

-0.22

Correlation Coefficient

Seadrill  CDW Corp

Very good diversification

The 3 months correlation between Seadrill and CDW is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp and Seadrill 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 Seadrill Limited are associated (or correlated) with CDW Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corp has no effect on the direction of Seadrill i.e., Seadrill and CDW Corp go up and down completely randomly.

Pair Corralation between Seadrill and CDW Corp

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the CDW Corp. In addition to that, Seadrill is 1.55 times more volatile than CDW Corp. It trades about -0.18 of its total potential returns per unit of risk. CDW Corp is currently generating about 0.01 per unit of volatility. If you would invest  17,745  in CDW Corp on September 19, 2024 and sell it today you would earn a total of  34.00  from holding CDW Corp or generate 0.19% return on investment over 90 days.

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

Seadrill Limited  vs.  CDW Corp

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 weak 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.

CDW Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDW Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Seadrill and CDW Corp

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

The idea behind Seadrill Limited and CDW Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.