Correlation Between Seadrill and Enersys

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

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

Diversification Opportunities for Seadrill and Enersys

0.11

Correlation Coefficient

Seadrill  Enersys

Average diversification

The 3 months correlation between Seadrill and Enersys is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Enersys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enersys 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 Enersys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enersys has no effect on the direction of Seadrill i.e., Seadrill and Enersys go up and down completely randomly.

Pair Corralation between Seadrill and Enersys

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Enersys. In addition to that, Seadrill is 1.35 times more volatile than Enersys. It trades about -0.28 of its total potential returns per unit of risk. Enersys is currently generating about -0.14 per unit of volatility. If you would invest  9,641  in Enersys on September 30, 2024 and sell it today you would lose (373.00) from holding Enersys or give up 3.87% of portfolio value over 90 days.

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

Seadrill Limited  vs.  Enersys

Seadrill Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Enersys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enersys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Seadrill and Enersys

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

The idea behind Seadrill Limited and Enersys 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.