Correlation Between Seadrill and Athabasca Oil

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

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

Diversification Opportunities for Seadrill and Athabasca Oil

0.67

Correlation Coefficient

Seadrill  Athabasca Oil

Poor diversification

The 3 months correlation between Seadrill and Athabasca is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Athabasca Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athabasca Oil Corp 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 Athabasca Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athabasca Oil Corp has no effect on the direction of Seadrill i.e., Seadrill and Athabasca Oil go up and down completely randomly.

Pair Corralation between Seadrill and Athabasca Oil

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Athabasca Oil. But the stock apears to be less risky and, when comparing its historical volatility, Seadrill Limited is 1.05 times less risky than Athabasca Oil. The stock trades about -0.02 of its potential returns per unit of risk. The Athabasca Oil Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Athabasca Oil Corp on December 2, 2024 and sell it today you would earn a total of  113.00  from holding Athabasca Oil Corp or generate 52.56% return on investment over 90 days.

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

Seadrill Limited  vs.  Athabasca Oil Corp

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 unfluctuating 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.

Athabasca Oil Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Athabasca Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Seadrill and Athabasca Oil

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

The idea behind Seadrill Limited and Athabasca Oil Corp 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.