Correlation Between Hooker Furniture and Seadrill

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

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

Diversification Opportunities for Hooker Furniture and Seadrill

0.5

Correlation Coefficient

Hooker Furniture  Seadrill

Very weak diversification

The 3 months correlation between Hooker and Seadrill is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hooker Furniture and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Hooker Furniture 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 Hooker Furniture 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 Hooker Furniture i.e., Hooker Furniture and Seadrill go up and down completely randomly.

Pair Corralation between Hooker Furniture and Seadrill

Given the investment horizon of 90 days Hooker Furniture is expected to generate 0.76 times more return on investment than Seadrill. However, Hooker Furniture is 1.32 times less risky than Seadrill. It trades about -0.2 of its potential returns per unit of risk. Seadrill Limited is currently generating about -0.25 per unit of risk. If you would invest  1,349  in Hooker Furniture on December 29, 2024 and sell it today you would lose (304.00) from holding Hooker Furniture or give up 22.54% of portfolio value over 90 days.

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

Hooker Furniture  vs.  Seadrill Limited

Hooker Furniture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hooker Furniture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Hooker Furniture and Seadrill

The main advantage of trading using opposite Hooker Furniture and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hooker Furniture 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 Hooker Furniture 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.