Correlation Between Cabo Drilling and Seadrill

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

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

Diversification Opportunities for Cabo Drilling and Seadrill

0.0

Correlation Coefficient

Cabo Drilling  Seadrill

Pay attention - limited upside

The 3 months correlation between Cabo and Seadrill is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cabo Drilling Corp and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Cabo 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 Cabo Drilling Corp 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 Cabo Drilling i.e., Cabo Drilling and Seadrill go up and down completely randomly.

Pair Corralation between Cabo Drilling and Seadrill

If you would invest  0.01  in Cabo Drilling Corp on November 28, 2024 and sell it today you would earn a total of  0.00  from holding Cabo Drilling Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cabo Drilling Corp  vs.  Seadrill Limited

Cabo Drilling Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabo Drilling Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Cabo Drilling is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Seadrill Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Cabo Drilling and Seadrill

The main advantage of trading using opposite Cabo Drilling and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabo Drilling 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 Cabo Drilling Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.