Correlation Between Seadrill and Beneficient

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

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

Diversification Opportunities for Seadrill and Beneficient

0.14

Correlation Coefficient

Seadrill  Beneficient

Average diversification

The 3 months correlation between Seadrill and Beneficient is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Beneficient Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beneficient Class 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 Beneficient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beneficient Class has no effect on the direction of Seadrill i.e., Seadrill and Beneficient go up and down completely randomly.

Pair Corralation between Seadrill and Beneficient

Given the investment horizon of 90 days Seadrill Limited is expected to generate 0.31 times more return on investment than Beneficient. However, Seadrill Limited is 3.27 times less risky than Beneficient. It trades about -0.06 of its potential returns per unit of risk. Beneficient Class A is currently generating about -0.15 per unit of risk. If you would invest  4,014  in Seadrill Limited on October 9, 2024 and sell it today you would lose (232.00) from holding Seadrill Limited or give up 5.78% of portfolio value over 90 days.

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

Seadrill Limited  vs.  Beneficient Class A

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 quite persistent basic indicators, Seadrill is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Beneficient Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beneficient Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Seadrill and Beneficient

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

The idea behind Seadrill Limited and Beneficient Class A 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.