Correlation Between Sapiens International and Seadrill

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

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

Diversification Opportunities for Sapiens International and Seadrill

-0.15

Correlation Coefficient

Sapiens International  Seadrill

Good diversification

The 3 months correlation between Sapiens and Seadrill is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sapiens International and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Sapiens International 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 Sapiens International 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 Sapiens International i.e., Sapiens International and Seadrill go up and down completely randomly.

Pair Corralation between Sapiens International and Seadrill

Given the investment horizon of 90 days Sapiens International is expected to generate 0.62 times more return on investment than Seadrill. However, Sapiens International is 1.62 times less risky than Seadrill. It trades about 0.12 of its potential returns per unit of risk. Seadrill Limited is currently generating about -0.23 per unit of risk. If you would invest  2,712  in Sapiens International on September 21, 2024 and sell it today you would earn a total of  83.50  from holding Sapiens International or generate 3.08% return on investment over 90 days.

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

Sapiens International  vs.  Seadrill Limited

Sapiens International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Sapiens International and Seadrill

The main advantage of trading using opposite Sapiens International and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sapiens International 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 Sapiens International 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.