Correlation Between Seadrill and JD Sports
Can any of the company-specific risk be diversified away by investing in both Seadrill and JD Sports 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 JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seadrill Limited and JD Sports Fashion, you can compare the effects of market volatilities on Seadrill and JD Sports 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 JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and JD Sports.
Diversification Opportunities for Seadrill and JD Sports
Very good diversification
The 3 months correlation between Seadrill and JDDSF is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of Seadrill i.e., Seadrill and JD Sports go up and down completely randomly.
Pair Corralation between Seadrill and JD Sports
Given the investment horizon of 90 days Seadrill Limited is expected to generate 0.66 times more return on investment than JD Sports. However, Seadrill Limited is 1.52 times less risky than JD Sports. It trades about 0.07 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.21 per unit of risk. If you would invest 3,935 in Seadrill Limited on September 1, 2024 and sell it today you would earn a total of 129.00 from holding Seadrill Limited or generate 3.28% 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. JD Sports Fashion
Performance |
| Timeline |
| Seadrill Limited |
| JD Sports Fashion |
Seadrill and JD Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seadrill and JD Sports
The main advantage of trading using opposite Seadrill and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, JD Sports 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 JD Sports will offset losses from the drop in JD Sports' long position.| Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc | Seadrill vs. Helmerich and Payne |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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