Correlation Between Seadrill and Evolution Mining

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

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

Diversification Opportunities for Seadrill and Evolution Mining

-0.85

Correlation Coefficient

Seadrill  Evolution Mining

Pay attention - limited upside

The 3 months correlation between Seadrill and Evolution is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Evolution Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining 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 Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of Seadrill i.e., Seadrill and Evolution Mining go up and down completely randomly.

Pair Corralation between Seadrill and Evolution Mining

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Evolution Mining. But the stock apears to be less risky and, when comparing its historical volatility, Seadrill Limited is 1.59 times less risky than Evolution Mining. The stock trades about -0.25 of its potential returns per unit of risk. The Evolution Mining is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  300.00  in Evolution Mining on December 29, 2024 and sell it today you would earn a total of  155.00  from holding Evolution Mining or generate 51.67% return on investment over 90 days.

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

Seadrill Limited  vs.  Evolution Mining

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.

Evolution Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Evolution Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seadrill and Evolution Mining

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

The idea behind Seadrill Limited and Evolution Mining 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.