Correlation Between Seadrill and Crown Point

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

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

Diversification Opportunities for Seadrill and Crown Point

-0.39

Correlation Coefficient

Seadrill  Crown Point

Very good diversification

The 3 months correlation between Seadrill and Crown is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Crown Point Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Point 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 Crown Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Point Energy has no effect on the direction of Seadrill i.e., Seadrill and Crown Point go up and down completely randomly.

Pair Corralation between Seadrill and Crown Point

Given the investment horizon of 90 days Seadrill Limited is expected to generate 0.77 times more return on investment than Crown Point. However, Seadrill Limited is 1.3 times less risky than Crown Point. It trades about 0.03 of its potential returns per unit of risk. Crown Point Energy is currently generating about -0.18 per unit of risk. If you would invest  3,899  in Seadrill Limited on September 13, 2024 and sell it today you would earn a total of  97.00  from holding Seadrill Limited or generate 2.49% return on investment over 90 days.

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

Seadrill Limited  vs.  Crown Point Energy

Seadrill Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 2 (%) 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.

Crown Point Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Point Energy 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 essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Seadrill and Crown Point

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

The idea behind Seadrill Limited and Crown Point 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.