Correlation Between China Clean and Seadrill

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

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

Diversification Opportunities for China Clean and Seadrill

0.0

Correlation Coefficient

China Clean  Seadrill

Pay attention - limited upside

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

Pair Corralation between China Clean and Seadrill

If you would invest  0.01  in China Clean Energy on October 22, 2024 and sell it today you would earn a total of  0.00  from holding China Clean Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.49%
Values	Daily Returns

China Clean Energy  vs.  Seadrill Limited

China Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, China Clean is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Seadrill Limited

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Seadrill may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Clean and Seadrill

The main advantage of trading using opposite China Clean and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Clean 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 China Clean Energy 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..