Correlation Between Diamond Offshore and Transocean

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

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

Diversification Opportunities for Diamond Offshore and Transocean

0.0

Correlation Coefficient

Diamond Offshore  Transocean

Pay attention - limited upside

The 3 months correlation between Diamond and Transocean is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Offshore Drilling and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Diamond Offshore 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 Diamond Offshore Drilling are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Diamond Offshore i.e., Diamond Offshore and Transocean go up and down completely randomly.

Pair Corralation between Diamond Offshore and Transocean

If you would invest (100.00) in Diamond Offshore Drilling on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Diamond Offshore Drilling or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Diamond Offshore Drilling  vs.  Transocean

Diamond Offshore Drilling

Risk-Adjusted Performance

Very Weak

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

Transocean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Diamond Offshore and Transocean

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

The idea behind Diamond Offshore Drilling and Transocean 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.