Correlation Between Seadrill and Freedom Holding
Can any of the company-specific risk be diversified away by investing in both Seadrill and Freedom Holding 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 Freedom Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seadrill Limited and Freedom Holding Corp, you can compare the effects of market volatilities on Seadrill and Freedom Holding 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 Freedom Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Freedom Holding.
Diversification Opportunities for Seadrill and Freedom Holding
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Seadrill and Freedom is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Freedom Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holding Corp 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 Freedom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holding Corp has no effect on the direction of Seadrill i.e., Seadrill and Freedom Holding go up and down completely randomly.
Pair Corralation between Seadrill and Freedom Holding
Given the investment horizon of 90 days Seadrill is expected to generate 19.0 times less return on investment than Freedom Holding. But when comparing it to its historical volatility, Seadrill Limited is 1.03 times less risky than Freedom Holding. It trades about 0.0 of its potential returns per unit of risk. Freedom Holding Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,322 in Freedom Holding Corp on September 19, 2024 and sell it today you would earn a total of 6,796 from holding Freedom Holding Corp or generate 107.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seadrill Limited vs. Freedom Holding Corp
Performance |
| Timeline |
| Seadrill Limited |
| Freedom Holding Corp |
Seadrill and Freedom Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seadrill and Freedom Holding
The main advantage of trading using opposite Seadrill and Freedom Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, Freedom Holding 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 Freedom Holding will offset losses from the drop in Freedom Holding's long position.| Seadrill vs. Helmerich and Payne | Seadrill vs. Sable Offshore Corp | Seadrill vs. Borr Drilling | Seadrill vs. Valaris |
| Freedom Holding vs. Scully Royalty | Freedom Holding vs. Mercurity Fintech Holding | Freedom Holding vs. Donnelley Financial Solutions | Freedom Holding vs. CreditRiskMonitorCom |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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