Correlation Between Seadrill and JetBlue Airways

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

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

Diversification Opportunities for Seadrill and JetBlue Airways

-0.46

Correlation Coefficient

Seadrill  JetBlue Airways

Very good diversification

The 3 months correlation between Seadrill and JetBlue is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and JetBlue Airways Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JetBlue Airways 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 JetBlue Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JetBlue Airways Corp has no effect on the direction of Seadrill i.e., Seadrill and JetBlue Airways go up and down completely randomly.

Pair Corralation between Seadrill and JetBlue Airways

Given the investment horizon of 90 days Seadrill is expected to generate 8.59 times less return on investment than JetBlue Airways. But when comparing it to its historical volatility, Seadrill Limited is 1.83 times less risky than JetBlue Airways. It trades about 0.01 of its potential returns per unit of risk. JetBlue Airways Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  592.00  in JetBlue Airways Corp on September 12, 2024 and sell it today you would earn a total of  86.00  from holding JetBlue Airways Corp or generate 14.53% return on investment over 90 days.

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

Seadrill Limited  vs.  JetBlue Airways Corp

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.

JetBlue Airways Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JetBlue Airways Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, JetBlue Airways unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seadrill and JetBlue Airways

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

The idea behind Seadrill Limited and JetBlue Airways 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.