Correlation Between Transocean and VHAI

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

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

Diversification Opportunities for Transocean and VHAI

0.32

Correlation Coefficient

Transocean  VHAI

Weak diversification

The 3 months correlation between Transocean and VHAI is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Transocean and VHAI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VHAI and Transocean 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 Transocean are associated (or correlated) with VHAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VHAI has no effect on the direction of Transocean i.e., Transocean and VHAI go up and down completely randomly.

Pair Corralation between Transocean and VHAI

If you would invest  0.57  in VHAI on September 28, 2024 and sell it today you would earn a total of  0.00  from holding VHAI or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	9.52%
Values	Daily Returns

Transocean  vs.  VHAI

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean 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 forward 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.

VHAI

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly fragile basic indicators, VHAI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Transocean and VHAI

The main advantage of trading using opposite Transocean and VHAI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transocean position performs unexpectedly, VHAI 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 VHAI will offset losses from the drop in VHAI's long position.

The idea behind Transocean and VHAI 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.