Correlation Between Seadrill and Borr Drilling
Can any of the company-specific risk be diversified away by investing in both Seadrill 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 Seadrill and Borr Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seadrill Limited and Borr Drilling, you can compare the effects of market volatilities on Seadrill 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 Seadrill with a short position of Borr Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Borr Drilling.
Diversification Opportunities for Seadrill and Borr Drilling
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Seadrill and Borr is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Borr Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borr Drilling and Seadrill 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 Seadrill Limited 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 Seadrill i.e., Seadrill and Borr Drilling go up and down completely randomly.
Pair Corralation between Seadrill and Borr Drilling
Given the investment horizon of 90 days Seadrill Limited is expected to generate 0.83 times more return on investment than Borr Drilling. However, Seadrill Limited is 1.21 times less risky than Borr Drilling. It trades about -0.07 of its potential returns per unit of risk. Borr Drilling is currently generating about -0.14 per unit of risk. If you would invest 5,237 in Seadrill Limited on August 24, 2024 and sell it today you would lose (1,206) from holding Seadrill Limited or give up 23.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seadrill Limited vs. Borr Drilling
Performance |
| Timeline |
| Seadrill Limited |
| Borr Drilling |
Seadrill and Borr Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seadrill and Borr Drilling
The main advantage of trading using opposite Seadrill and Borr Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill 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.| Seadrill vs. Nabors Industries | Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc |
| 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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