Correlation Between Seadrill and Agnico Eagle

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

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

Diversification Opportunities for Seadrill and Agnico Eagle

-0.17

Correlation Coefficient

Seadrill  Agnico Eagle

Good diversification

The 3 months correlation between Seadrill and Agnico is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Agnico Eagle Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agnico Eagle Mines and Seadrill 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 Seadrill Limited are associated (or correlated) with Agnico Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agnico Eagle Mines has no effect on the direction of Seadrill i.e., Seadrill and Agnico Eagle go up and down completely randomly.

Pair Corralation between Seadrill and Agnico Eagle

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Agnico Eagle. In addition to that, Seadrill is 1.15 times more volatile than Agnico Eagle Mines. It trades about -0.01 of its total potential returns per unit of risk. Agnico Eagle Mines is currently generating about 0.09 per unit of volatility. If you would invest  4,990  in Agnico Eagle Mines on September 12, 2024 and sell it today you would earn a total of  3,441  from holding Agnico Eagle Mines or generate 68.96% return on investment over 90 days.

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

Seadrill Limited  vs.  Agnico Eagle Mines

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Agnico Eagle Mines

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Agnico Eagle is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Seadrill and Agnico Eagle

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

The idea behind Seadrill Limited and Agnico Eagle Mines 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .