Correlation Between FactSet Research and Seadrill

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

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

Diversification Opportunities for FactSet Research and Seadrill

0.15

Correlation Coefficient

FactSet Research  Seadrill

Average diversification

The 3 months correlation between FactSet and Seadrill is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding FactSet Research Systems and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and FactSet Research 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 FactSet Research Systems 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 FactSet Research i.e., FactSet Research and Seadrill go up and down completely randomly.

Pair Corralation between FactSet Research and Seadrill

Considering the 90-day investment horizon FactSet Research Systems is expected to under-perform the Seadrill. But the stock apears to be less risky and, when comparing its historical volatility, FactSet Research Systems is 1.44 times less risky than Seadrill. The stock trades about -0.12 of its potential returns per unit of risk. The Seadrill Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,903  in Seadrill Limited on October 10, 2024 and sell it today you would lose (58.00) from holding Seadrill Limited or give up 1.49% of portfolio value over 90 days.

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

FactSet Research Systems  vs.  Seadrill Limited

FactSet Research Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FactSet Research Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, FactSet Research is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Seadrill Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Seadrill is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with FactSet Research and Seadrill

The main advantage of trading using opposite FactSet Research and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FactSet Research 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 FactSet Research Systems 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.