Correlation Between Seadrill and BRP
Can any of the company-specific risk be diversified away by investing in both Seadrill and BRP 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 BRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seadrill Limited and BRP Inc, you can compare the effects of market volatilities on Seadrill and BRP 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 BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and BRP.
Diversification Opportunities for Seadrill and BRP
Very poor diversification
The 3 months correlation between Seadrill and BRP is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Seadrill i.e., Seadrill and BRP go up and down completely randomly.
Pair Corralation between Seadrill and BRP
Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the BRP. In addition to that, Seadrill is 1.11 times more volatile than BRP Inc. It trades about -0.65 of its total potential returns per unit of risk. BRP Inc is currently generating about -0.18 per unit of volatility. If you would invest 4,395 in BRP Inc on December 5, 2024 and sell it today you would lose (441.00) from holding BRP Inc or give up 10.03% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Seadrill Limited vs. BRP Inc
Performance |
Timeline |
Seadrill Limited |
BRP Inc |
Seadrill and BRP Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Seadrill and BRP
The main advantage of trading using opposite Seadrill and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, BRP 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 BRP will offset losses from the drop in BRP's long position.Seadrill vs. Nabors Industries | Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |