Correlation Between Seadrill and Vantage Drilling
Can any of the company-specific risk be diversified away by investing in both Seadrill and Vantage 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 Vantage 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 Vantage Drilling International, you can compare the effects of market volatilities on Seadrill and Vantage 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 Vantage Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Vantage Drilling.
Diversification Opportunities for Seadrill and Vantage Drilling
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Seadrill and Vantage is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Vantage Drilling International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vantage Drilling Int 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 Vantage Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vantage Drilling Int has no effect on the direction of Seadrill i.e., Seadrill and Vantage Drilling go up and down completely randomly.
Pair Corralation between Seadrill and Vantage Drilling
Given the investment horizon of 90 days Seadrill is expected to generate 3.22 times less return on investment than Vantage Drilling. But when comparing it to its historical volatility, Seadrill Limited is 2.74 times less risky than Vantage Drilling. It trades about 0.04 of its potential returns per unit of risk. Vantage Drilling International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,500 in Vantage Drilling International on August 28, 2024 and sell it today you would earn a total of 1,125 from holding Vantage Drilling International or generate 75.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seadrill Limited vs. Vantage Drilling International
Performance |
| Timeline |
| Seadrill Limited |
| Vantage Drilling Int |
Seadrill and Vantage Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seadrill and Vantage Drilling
The main advantage of trading using opposite Seadrill and Vantage Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, Vantage 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 Vantage Drilling will offset losses from the drop in Vantage Drilling's long position.| Seadrill vs. Nabors Industries | Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc |
| Vantage Drilling vs. Noble plc | Vantage Drilling vs. Sinopec Oilfield Service | Vantage Drilling vs. Transocean | Vantage Drilling 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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