Correlation Between Seadrill and Mid Atlantic

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

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

Diversification Opportunities for Seadrill and Mid Atlantic

0.0

Correlation Coefficient

Seadrill  Mid Atlantic

Pay attention - limited upside

The 3 months correlation between Seadrill and Mid is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Mid Atlantic Home Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Atlantic Home 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 Mid Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Atlantic Home has no effect on the direction of Seadrill i.e., Seadrill and Mid Atlantic go up and down completely randomly.

Pair Corralation between Seadrill and Mid Atlantic

Given the investment horizon of 90 days Seadrill Limited is expected to generate 0.48 times more return on investment than Mid Atlantic. However, Seadrill Limited is 2.08 times less risky than Mid Atlantic. It trades about 0.02 of its potential returns per unit of risk. Mid Atlantic Home Health is currently generating about -0.06 per unit of risk. If you would invest  3,311  in Seadrill Limited on September 30, 2024 and sell it today you would earn a total of  349.00  from holding Seadrill Limited or generate 10.54% return on investment over 90 days.

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

Seadrill Limited  vs.  Mid Atlantic Home Health

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.

Mid Atlantic Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mid Atlantic Home Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Mid Atlantic is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Seadrill and Mid Atlantic

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

The idea behind Seadrill Limited and Mid Atlantic Home Health 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.