Correlation Between InPlay Oil and Seadrill

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

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

Diversification Opportunities for InPlay Oil and Seadrill

-0.16

Correlation Coefficient

InPlay Oil  Seadrill

Good diversification

The 3 months correlation between InPlay and Seadrill is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and InPlay Oil 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 InPlay Oil 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 InPlay Oil i.e., InPlay Oil and Seadrill go up and down completely randomly.

Pair Corralation between InPlay Oil and Seadrill

Assuming the 90 days horizon InPlay Oil Corp is expected to under-perform the Seadrill. But the otc stock apears to be less risky and, when comparing its historical volatility, InPlay Oil Corp is 1.11 times less risky than Seadrill. The otc stock trades about -0.13 of its potential returns per unit of risk. The Seadrill Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,974  in Seadrill Limited on September 5, 2024 and sell it today you would earn a total of  71.00  from holding Seadrill Limited or generate 1.79% return on investment over 90 days.

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

InPlay Oil Corp  vs.  Seadrill Limited

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 InPlay Oil and Seadrill

The main advantage of trading using opposite InPlay Oil and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InPlay Oil 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 InPlay Oil 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.