Correlation Between Seadrill and Precision Drilling
Can any of the company-specific risk be diversified away by investing in both Seadrill and Precision 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 Precision 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 Precision Drilling, you can compare the effects of market volatilities on Seadrill and Precision 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 Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Precision Drilling.
Diversification Opportunities for Seadrill and Precision Drilling
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Seadrill and Precision is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision 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 Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of Seadrill i.e., Seadrill and Precision Drilling go up and down completely randomly.
Pair Corralation between Seadrill and Precision Drilling
Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Precision Drilling. In addition to that, Seadrill is 1.02 times more volatile than Precision Drilling. It trades about -0.07 of its total potential returns per unit of risk. Precision Drilling is currently generating about -0.02 per unit of volatility. If you would invest 7,362 in Precision Drilling on August 24, 2024 and sell it today you would lose (749.00) from holding Precision Drilling or give up 10.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seadrill Limited vs. Precision Drilling
Performance |
| Timeline |
| Seadrill Limited |
| Precision Drilling |
Seadrill and Precision Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seadrill and Precision Drilling
The main advantage of trading using opposite Seadrill and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, Precision 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 Precision Drilling will offset losses from the drop in Precision Drilling's long position.| Seadrill vs. Nabors Industries | Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc |
| Precision Drilling vs. Helmerich and Payne | Precision Drilling vs. Nabors Industries | Precision Drilling vs. Seadrill Limited | Precision Drilling vs. Patterson UTI Energy |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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