Correlation Between Borr Drilling and Orca Energy

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

By analyzing existing cross correlation between Borr Drilling and Orca Energy Group, you can compare the effects of market volatilities on Borr Drilling and Orca Energy 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 Borr Drilling with a short position of Orca Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Borr Drilling and Orca Energy.

Diversification Opportunities for Borr Drilling and Orca Energy

0.87

Correlation Coefficient

Borr Drilling  Orca Energy

Very poor diversification

The 3 months correlation between Borr and Orca is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Borr Drilling and Orca Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orca Energy Group and Borr Drilling 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 Borr Drilling are associated (or correlated) with Orca Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orca Energy Group has no effect on the direction of Borr Drilling i.e., Borr Drilling and Orca Energy go up and down completely randomly.

Pair Corralation between Borr Drilling and Orca Energy

Given the investment horizon of 90 days Borr Drilling is expected to generate 6.2 times less return on investment than Orca Energy. But when comparing it to its historical volatility, Borr Drilling is 2.17 times less risky than Orca Energy. It trades about 0.01 of its potential returns per unit of risk. Orca Energy Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  348.00  in Orca Energy Group on September 4, 2024 and sell it today you would lose (118.00) from holding Orca Energy Group or give up 33.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	71.52%
Values	Daily Returns

Borr Drilling  vs.  Orca Energy Group

Borr Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Orca Energy Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orca Energy Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Orca Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Borr Drilling and Orca Energy

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

The idea behind Borr Drilling and Orca Energy Group 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.