Correlation Between Seadrill and Eni SPA
Can any of the company-specific risk be diversified away by investing in both Seadrill and Eni SPA 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 Eni SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seadrill Limited and Eni SpA ADR, you can compare the effects of market volatilities on Seadrill and Eni SPA 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 Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Eni SPA.
Diversification Opportunities for Seadrill and Eni SPA
Modest diversification
The 3 months correlation between Seadrill and Eni is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Eni SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA ADR 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 Eni SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eni SpA ADR has no effect on the direction of Seadrill i.e., Seadrill and Eni SPA go up and down completely randomly.
Pair Corralation between Seadrill and Eni SPA
Given the investment horizon of 90 days Seadrill Limited is expected to generate 2.46 times more return on investment than Eni SPA. However, Seadrill is 2.46 times more volatile than Eni SpA ADR. It trades about 0.01 of its potential returns per unit of risk. Eni SpA ADR is currently generating about -0.12 per unit of risk. If you would invest 3,784 in Seadrill Limited on October 9, 2024 and sell it today you would lose (2.00) from holding Seadrill Limited or give up 0.05% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Seadrill Limited vs. Eni SpA ADR
Performance |
Timeline |
Seadrill Limited |
Eni SpA ADR |
Seadrill and Eni SPA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Seadrill and Eni SPA
The main advantage of trading using opposite Seadrill and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, Eni SPA 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 Eni SPA will offset losses from the drop in Eni SPA's long position.Seadrill vs. Nabors Industries | ||
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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