Correlation Between Antero Midstream and Seadrill

Can any of the company-specific risk be diversified away by investing in both Antero Midstream and Seadrill 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 Antero Midstream and Seadrill into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Antero Midstream Partners and Seadrill Limited, you can compare the effects of market volatilities on Antero Midstream and Seadrill 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 Antero Midstream with a short position of Seadrill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Antero Midstream and Seadrill.

Diversification Opportunities for Antero Midstream and Seadrill

0.33

Correlation Coefficient

Antero Midstream  Seadrill

Weak diversification

The 3 months correlation between Antero and Seadrill is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Antero Midstream 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 Antero Midstream Partners are associated (or correlated) with Seadrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seadrill Limited has no effect on the direction of Antero Midstream i.e., Antero Midstream and Seadrill go up and down completely randomly.

Pair Corralation between Antero Midstream and Seadrill

Allowing for the 90-day total investment horizon Antero Midstream Partners is expected to generate 0.57 times more return on investment than Seadrill. However, Antero Midstream Partners is 1.77 times less risky than Seadrill. It trades about 0.08 of its potential returns per unit of risk. Seadrill Limited is currently generating about 0.03 per unit of risk. If you would invest  914.00  in Antero Midstream Partners on September 23, 2024 and sell it today you would earn a total of  587.00  from holding Antero Midstream Partners or generate 64.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Antero Midstream Partners  vs.  Seadrill Limited

Antero Midstream Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Antero Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Antero Midstream is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Seadrill Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Antero Midstream and Seadrill

The main advantage of trading using opposite Antero Midstream and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Antero Midstream position performs unexpectedly, Seadrill 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 Seadrill will offset losses from the drop in Seadrill's long position.

The idea behind Antero Midstream Partners and Seadrill Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.