Correlation Between Seadrill and SL Green

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

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

Diversification Opportunities for Seadrill and SL Green

0.38

Correlation Coefficient

Seadrill  SL Green

Weak diversification

The 3 months correlation between Seadrill and SLG is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and SL Green Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SL Green Realty 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 SL Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SL Green Realty has no effect on the direction of Seadrill i.e., Seadrill and SL Green go up and down completely randomly.

Pair Corralation between Seadrill and SL Green

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the SL Green. In addition to that, Seadrill is 1.2 times more volatile than SL Green Realty. It trades about -0.04 of its total potential returns per unit of risk. SL Green Realty is currently generating about -0.02 per unit of volatility. If you would invest  6,917  in SL Green Realty on September 30, 2024 and sell it today you would lose (293.00) from holding SL Green Realty or give up 4.24% of portfolio value over 90 days.

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

Seadrill Limited  vs.  SL Green Realty

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.

SL Green Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SL Green Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, SL Green is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Seadrill and SL Green

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

The idea behind Seadrill Limited and SL Green Realty 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 Anywhere module to track or share privately all of your investments from the convenience of any device.