Correlation Between Orca Energy and Seadrill

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

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

Diversification Opportunities for Orca Energy and Seadrill

0.21

Correlation Coefficient

Orca Energy  Seadrill

Modest diversification

The 3 months correlation between Orca and Seadrill is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Orca Energy Group and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Orca Energy 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 Orca Energy Group 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 Orca Energy i.e., Orca Energy and Seadrill go up and down completely randomly.

Pair Corralation between Orca Energy and Seadrill

Assuming the 90 days horizon Orca Energy Group is expected to generate 1.68 times more return on investment than Seadrill. However, Orca Energy is 1.68 times more volatile than Seadrill Limited. It trades about 0.01 of its potential returns per unit of risk. Seadrill Limited is currently generating about -0.25 per unit of risk. If you would invest  207.00  in Orca Energy Group on December 28, 2024 and sell it today you would lose (7.00) from holding Orca Energy Group or give up 3.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.44%
Values	Daily Returns

Orca Energy Group  vs.  Seadrill Limited

Orca Energy Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orca Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Orca Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 weak 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 Orca Energy and Seadrill

The main advantage of trading using opposite Orca Energy and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orca Energy 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 Orca Energy Group 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.