Correlation Between SPACE and Borr Drilling
Can any of the company-specific risk be diversified away by investing in both SPACE and Borr Drilling 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 SPACE and Borr Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPACE and Borr Drilling, you can compare the effects of market volatilities on SPACE and Borr Drilling 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 SPACE with a short position of Borr Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPACE and Borr Drilling.
Diversification Opportunities for SPACE and Borr Drilling
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between SPACE and Borr is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Borr Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borr Drilling and SPACE 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 SPACE are associated (or correlated) with Borr Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borr Drilling has no effect on the direction of SPACE i.e., SPACE and Borr Drilling go up and down completely randomly.
Pair Corralation between SPACE and Borr Drilling
Assuming the 90 days horizon SPACE is expected to generate 1.34 times more return on investment than Borr Drilling. However, SPACE is 1.34 times more volatile than Borr Drilling. It trades about 0.51 of its potential returns per unit of risk. Borr Drilling is currently generating about -0.13 per unit of risk. If you would invest 36.00 in SPACE on September 4, 2024 and sell it today you would earn a total of 23.00 from holding SPACE or generate 63.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPACE vs. Borr Drilling
Performance |
| Timeline |
| SPACE |
| Borr Drilling |
SPACE and Borr Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPACE and Borr Drilling
The main advantage of trading using opposite SPACE and Borr Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPACE position performs unexpectedly, Borr Drilling 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 Borr Drilling will offset losses from the drop in Borr Drilling's long position.The idea behind SPACE and Borr Drilling 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.| Borr Drilling vs. Noble plc | Borr Drilling vs. Patterson UTI Energy | Borr Drilling vs. Nabors Industries | Borr Drilling vs. Seadrill Limited |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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