Correlation Between SmartStop Self and Seadrill

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

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

Diversification Opportunities for SmartStop Self and Seadrill

0.45

Correlation Coefficient

SmartStop Self  Seadrill

Very weak diversification

The 3 months correlation between SmartStop and Seadrill is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding SmartStop Self Storage and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and SmartStop Self 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 SmartStop Self Storage 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 SmartStop Self i.e., SmartStop Self and Seadrill go up and down completely randomly.

Pair Corralation between SmartStop Self and Seadrill

Assuming the 90 days horizon SmartStop Self Storage is expected to generate 0.34 times more return on investment than Seadrill. However, SmartStop Self Storage is 2.97 times less risky than Seadrill. It trades about -0.03 of its potential returns per unit of risk. Seadrill Limited is currently generating about -0.06 per unit of risk. If you would invest  900.00  in SmartStop Self Storage on September 19, 2024 and sell it today you would lose (15.00) from holding SmartStop Self Storage or give up 1.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

SmartStop Self Storage  vs.  Seadrill Limited

SmartStop Self Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SmartStop Self Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, SmartStop Self is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 weak 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 SmartStop Self and Seadrill

The main advantage of trading using opposite SmartStop Self and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SmartStop Self 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 SmartStop Self Storage 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.