Correlation Between Seadrill and Lotus Technology
Can any of the company-specific risk be diversified away by investing in both Seadrill and Lotus Technology 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 Lotus Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seadrill Limited and Lotus Technology American, you can compare the effects of market volatilities on Seadrill and Lotus Technology 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 Lotus Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Lotus Technology.
Diversification Opportunities for Seadrill and Lotus Technology
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Seadrill and Lotus is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Lotus Technology American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Technology American 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 Lotus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Technology American has no effect on the direction of Seadrill i.e., Seadrill and Lotus Technology go up and down completely randomly.
Pair Corralation between Seadrill and Lotus Technology
Given the investment horizon of 90 days Seadrill Limited is expected to generate 0.59 times more return on investment than Lotus Technology. However, Seadrill Limited is 1.71 times less risky than Lotus Technology. It trades about 0.04 of its potential returns per unit of risk. Lotus Technology American is currently generating about -0.02 per unit of risk. If you would invest 2,953 in Seadrill Limited on September 3, 2024 and sell it today you would earn a total of 1,111 from holding Seadrill Limited or generate 37.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seadrill Limited vs. Lotus Technology American
Performance |
| Timeline |
| Seadrill Limited |
| Lotus Technology American |
Seadrill and Lotus Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seadrill and Lotus Technology
The main advantage of trading using opposite Seadrill and Lotus Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, Lotus Technology 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 Lotus Technology will offset losses from the drop in Lotus Technology's long position.| Seadrill vs. Nabors Industries | Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc |
| Lotus Technology vs. Compania Cervecerias Unidas | Lotus Technology vs. PepsiCo | Lotus Technology vs. Merit Medical Systems | Lotus Technology vs. Scandinavian Tobacco Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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