Correlation Between Seadrill and Atmos Energy

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

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

Diversification Opportunities for Seadrill and Atmos Energy

0.16

Correlation Coefficient

Seadrill  Atmos Energy

Average diversification

The 3 months correlation between Seadrill and Atmos is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy 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 Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of Seadrill i.e., Seadrill and Atmos Energy go up and down completely randomly.

Pair Corralation between Seadrill and Atmos Energy

Given the investment horizon of 90 days Seadrill Limited is expected to generate 2.22 times more return on investment than Atmos Energy. However, Seadrill is 2.22 times more volatile than Atmos Energy. It trades about 0.03 of its potential returns per unit of risk. Atmos Energy is currently generating about 0.06 per unit of risk. If you would invest  3,024  in Seadrill Limited on September 23, 2024 and sell it today you would earn a total of  608.00  from holding Seadrill Limited or generate 20.11% return on investment over 90 days.

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

Seadrill Limited  vs.  Atmos Energy

Seadrill Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Atmos Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Atmos Energy 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 Atmos Energy

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

The idea behind Seadrill Limited and Atmos Energy 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 Stocks Directory module to find actively traded stocks across global markets.