Correlation Between Seadrill and Encounter Technologi

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

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

Diversification Opportunities for Seadrill and Encounter Technologi

0.0

Correlation Coefficient

Seadrill  Encounter Technologi

Pay attention - limited upside

The 3 months correlation between Seadrill and Encounter is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Encounter Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encounter Technologi 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 Encounter Technologi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encounter Technologi has no effect on the direction of Seadrill i.e., Seadrill and Encounter Technologi go up and down completely randomly.

Pair Corralation between Seadrill and Encounter Technologi

If you would invest  3,632  in Seadrill Limited on October 21, 2024 and sell it today you would earn a total of  120.00  from holding Seadrill Limited or generate 3.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Seadrill Limited  vs.  Encounter Technologi

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.

Encounter Technologi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encounter Technologi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Encounter Technologi is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Seadrill and Encounter Technologi

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

The idea behind Seadrill Limited and Encounter Technologi 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.