Correlation Between Borr Drilling and Whitecap Resources

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

By analyzing existing cross correlation between Borr Drilling and Whitecap Resources, you can compare the effects of market volatilities on Borr Drilling and Whitecap Resources 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 Whitecap Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Borr Drilling and Whitecap Resources.

Diversification Opportunities for Borr Drilling and Whitecap Resources

0.29

Correlation Coefficient

Borr Drilling  Whitecap Resources

Modest diversification

The 3 months correlation between Borr and Whitecap is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Borr Drilling and Whitecap Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitecap Resources 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 Whitecap Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitecap Resources has no effect on the direction of Borr Drilling i.e., Borr Drilling and Whitecap Resources go up and down completely randomly.

Pair Corralation between Borr Drilling and Whitecap Resources

Given the investment horizon of 90 days Borr Drilling is expected to under-perform the Whitecap Resources. In addition to that, Borr Drilling is 1.73 times more volatile than Whitecap Resources. It trades about -0.2 of its total potential returns per unit of risk. Whitecap Resources is currently generating about 0.0 per unit of volatility. If you would invest  728.00  in Whitecap Resources on September 4, 2024 and sell it today you would lose (7.00) from holding Whitecap Resources or give up 0.96% of portfolio value over 90 days.

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

Borr Drilling  vs.  Whitecap Resources

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.

Whitecap Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitecap Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Whitecap Resources 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 Whitecap Resources

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

The idea behind Borr Drilling and Whitecap Resources 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.