Correlation Between Vantage Drilling and Sable Offshore

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

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

Diversification Opportunities for Vantage Drilling and Sable Offshore

-0.03

Correlation Coefficient

Vantage Drilling  Sable Offshore

Good diversification

The 3 months correlation between Vantage and Sable is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Vantage Drilling International and Sable Offshore Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sable Offshore Corp and Vantage Drilling 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 Vantage Drilling International are associated (or correlated) with Sable Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sable Offshore Corp has no effect on the direction of Vantage Drilling i.e., Vantage Drilling and Sable Offshore go up and down completely randomly.

Pair Corralation between Vantage Drilling and Sable Offshore

Assuming the 90 days horizon Vantage Drilling International is expected to generate 2.63 times more return on investment than Sable Offshore. However, Vantage Drilling is 2.63 times more volatile than Sable Offshore Corp. It trades about 0.05 of its potential returns per unit of risk. Sable Offshore Corp is currently generating about -0.03 per unit of risk. If you would invest  2,625  in Vantage Drilling International on September 15, 2024 and sell it today you would lose (75.00) from holding Vantage Drilling International or give up 2.86% of portfolio value over 90 days.

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

Vantage Drilling International  vs.  Sable Offshore Corp

Vantage Drilling Int

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vantage Drilling International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Vantage Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Sable Offshore Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sable Offshore Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Vantage Drilling and Sable Offshore

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

The idea behind Vantage Drilling International and Sable Offshore 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.