Correlation Between Seadrill and Rackspace Technology
Can any of the company-specific risk be diversified away by investing in both Seadrill and Rackspace 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 Rackspace 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 Rackspace Technology, you can compare the effects of market volatilities on Seadrill and Rackspace 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 Rackspace Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Rackspace Technology.
Diversification Opportunities for Seadrill and Rackspace Technology
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Seadrill and Rackspace is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Rackspace Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackspace Technology 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 Rackspace Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rackspace Technology has no effect on the direction of Seadrill i.e., Seadrill and Rackspace Technology go up and down completely randomly.
Pair Corralation between Seadrill and Rackspace Technology
Given the investment horizon of 90 days Seadrill is expected to generate 1.27 times less return on investment than Rackspace Technology. But when comparing it to its historical volatility, Seadrill Limited is 2.51 times less risky than Rackspace Technology. It trades about 0.04 of its potential returns per unit of risk. Rackspace Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 351.00 in Rackspace Technology on September 1, 2024 and sell it today you would lose (83.00) from holding Rackspace Technology or give up 23.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seadrill Limited vs. Rackspace Technology
Performance |
| Timeline |
| Seadrill Limited |
| Rackspace Technology |
Seadrill and Rackspace Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seadrill and Rackspace Technology
The main advantage of trading using opposite Seadrill and Rackspace Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, Rackspace 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 Rackspace Technology will offset losses from the drop in Rackspace Technology's long position.| Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc | Seadrill vs. Helmerich and Payne |
| Rackspace Technology vs. GigaCloud Technology Class | Rackspace Technology vs. Alarum Technologies | Rackspace Technology vs. Stem Inc | Rackspace Technology vs. Pagaya Technologies |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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