Correlation Between Seadrill and Forum Energy
Can any of the company-specific risk be diversified away by investing in both Seadrill and Forum Energy 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 Forum Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seadrill Limited and Forum Energy Metals, you can compare the effects of market volatilities on Seadrill and Forum Energy 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 Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Forum Energy.
Diversification Opportunities for Seadrill and Forum Energy
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Seadrill and Forum is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Forum Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Metals 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 Forum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Energy Metals has no effect on the direction of Seadrill i.e., Seadrill and Forum Energy go up and down completely randomly.
Pair Corralation between Seadrill and Forum Energy
Given the investment horizon of 90 days Seadrill is expected to generate 2.18 times less return on investment than Forum Energy. But when comparing it to its historical volatility, Seadrill Limited is 3.16 times less risky than Forum Energy. It trades about 0.04 of its potential returns per unit of risk. Forum Energy Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Forum Energy Metals on September 5, 2024 and sell it today you would lose (2.61) from holding Forum Energy Metals or give up 32.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seadrill Limited vs. Forum Energy Metals
Performance |
| Timeline |
| Seadrill Limited |
| Forum Energy Metals |
Seadrill and Forum Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seadrill and Forum Energy
The main advantage of trading using opposite Seadrill and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, Forum Energy 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 Forum Energy will offset losses from the drop in Forum Energy's long position.| Seadrill vs. Nabors Industries | Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc |
| Forum Energy vs. Seadrill Limited | Forum Energy vs. Noble plc | Forum Energy vs. Borr Drilling | Forum Energy vs. SCOR PK |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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