Correlation Between Sable Offshore and Seadrill

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

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

Diversification Opportunities for Sable Offshore and Seadrill

0.31

Correlation Coefficient

Sable Offshore  Seadrill

Weak diversification

The 3 months correlation between Sable and Seadrill is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sable Offshore Corp and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Sable Offshore 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 Sable Offshore Corp are associated (or correlated) with Seadrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seadrill Limited has no effect on the direction of Sable Offshore i.e., Sable Offshore and Seadrill go up and down completely randomly.

Pair Corralation between Sable Offshore and Seadrill

Considering the 90-day investment horizon Sable Offshore Corp is expected to generate 1.96 times more return on investment than Seadrill. However, Sable Offshore is 1.96 times more volatile than Seadrill Limited. It trades about 0.03 of its potential returns per unit of risk. Seadrill Limited is currently generating about 0.01 per unit of risk. If you would invest  2,343  in Sable Offshore Corp on September 3, 2024 and sell it today you would earn a total of  5.00  from holding Sable Offshore Corp or generate 0.21% return on investment over 90 days.

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

Sable Offshore Corp  vs.  Seadrill Limited

Sable Offshore Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sable Offshore Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Sable Offshore may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 quite persistent basic indicators, Seadrill is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sable Offshore and Seadrill

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

The idea behind Sable Offshore Corp and Seadrill Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .