Correlation Between Pinterest and Seadrill

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

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

Diversification Opportunities for Pinterest and Seadrill

-0.29

Correlation Coefficient

Pinterest  Seadrill

Very good diversification

The 3 months correlation between Pinterest and Seadrill is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Pinterest and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Pinterest 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 Pinterest 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 Pinterest i.e., Pinterest and Seadrill go up and down completely randomly.

Pair Corralation between Pinterest and Seadrill

Given the investment horizon of 90 days Pinterest is expected to generate 1.0 times more return on investment than Seadrill. However, Pinterest is 1.0 times less risky than Seadrill. It trades about 0.08 of its potential returns per unit of risk. Seadrill Limited is currently generating about 0.04 per unit of risk. If you would invest  2,925  in Pinterest on September 6, 2024 and sell it today you would earn a total of  305.00  from holding Pinterest or generate 10.43% return on investment over 90 days.

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

Pinterest  vs.  Seadrill Limited

Pinterest

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pinterest are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pinterest may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Seadrill Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Seadrill may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pinterest and Seadrill

The main advantage of trading using opposite Pinterest and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinterest 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 Pinterest 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.