Correlation Between Seadrill and Joint Stock

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

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

Diversification Opportunities for Seadrill and Joint Stock

-0.03

Correlation Coefficient

Seadrill  Joint Stock

Good diversification

The 3 months correlation between Seadrill and Joint is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock 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 Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of Seadrill i.e., Seadrill and Joint Stock go up and down completely randomly.

Pair Corralation between Seadrill and Joint Stock

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Joint Stock. In addition to that, Seadrill is 1.01 times more volatile than Joint Stock. It trades about -0.06 of its total potential returns per unit of risk. Joint Stock is currently generating about 0.02 per unit of volatility. If you would invest  9,776  in Joint Stock on September 21, 2024 and sell it today you would earn a total of  100.50  from holding Joint Stock or generate 1.03% 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.  Joint Stock

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.

Joint Stock

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Joint Stock are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Joint Stock is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Seadrill and Joint Stock

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

The idea behind Seadrill Limited and Joint Stock 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.