Correlation Between Seadrill and CanSino Biologics

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

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

Diversification Opportunities for Seadrill and CanSino Biologics

-0.01

Correlation Coefficient

Seadrill  CanSino Biologics

Good diversification

The 3 months correlation between Seadrill and CanSino is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and CanSino Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CanSino Biologics 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 CanSino Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CanSino Biologics has no effect on the direction of Seadrill i.e., Seadrill and CanSino Biologics go up and down completely randomly.

Pair Corralation between Seadrill and CanSino Biologics

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the CanSino Biologics. But the stock apears to be less risky and, when comparing its historical volatility, Seadrill Limited is 2.27 times less risky than CanSino Biologics. The stock trades about -0.06 of its potential returns per unit of risk. The CanSino Biologics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  210.00  in CanSino Biologics on October 12, 2024 and sell it today you would earn a total of  145.00  from holding CanSino Biologics or generate 69.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.47%
Values	Daily Returns

Seadrill Limited  vs.  CanSino Biologics

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

CanSino Biologics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CanSino Biologics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, CanSino Biologics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Seadrill and CanSino Biologics

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

The idea behind Seadrill Limited and CanSino Biologics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.