Correlation Between Jacobs Solutions and Seadrill

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

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

Diversification Opportunities for Jacobs Solutions and Seadrill

0.08

Correlation Coefficient

Jacobs Solutions  Seadrill

Significant diversification

The 3 months correlation between Jacobs and Seadrill is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Jacobs Solutions 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 Jacobs Solutions 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 Jacobs Solutions i.e., Jacobs Solutions and Seadrill go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Seadrill

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.5 times more return on investment than Seadrill. However, Jacobs Solutions is 2.0 times less risky than Seadrill. It trades about -0.24 of its potential returns per unit of risk. Seadrill Limited is currently generating about -0.28 per unit of risk. If you would invest  14,123  in Jacobs Solutions on September 30, 2024 and sell it today you would lose (616.00) from holding Jacobs Solutions or give up 4.36% of portfolio value over 90 days.

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

Jacobs Solutions  vs.  Seadrill Limited

Jacobs Solutions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady forward-looking indicators, Jacobs Solutions is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Seadrill Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Jacobs Solutions and Seadrill

The main advantage of trading using opposite Jacobs Solutions and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacobs Solutions 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 Jacobs Solutions 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.