Correlation Between Seadrill and Uranium Energy

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

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

Diversification Opportunities for Seadrill and Uranium Energy

-0.26

Correlation Coefficient

Seadrill  Uranium Energy

Very good diversification

The 3 months correlation between Seadrill and Uranium is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Uranium Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uranium Energy 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 Uranium Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uranium Energy Corp has no effect on the direction of Seadrill i.e., Seadrill and Uranium Energy go up and down completely randomly.

Pair Corralation between Seadrill and Uranium Energy

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Uranium Energy. But the stock apears to be less risky and, when comparing its historical volatility, Seadrill Limited is 1.47 times less risky than Uranium Energy. The stock trades about -0.06 of its potential returns per unit of risk. The Uranium Energy Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  619.00  in Uranium Energy Corp on September 21, 2024 and sell it today you would earn a total of  89.00  from holding Uranium Energy Corp or generate 14.38% 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.  Uranium Energy 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 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.

Uranium Energy Corp

Risk-Adjusted Performance

5 of 100

OK

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

Pair Trading with Seadrill and Uranium Energy

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

The idea behind Seadrill Limited and Uranium Energy 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.