Correlation Between Seadrill and SPACE

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

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

Diversification Opportunities for Seadrill and SPACE

0.82

Correlation Coefficient

Seadrill  SPACE

Very poor diversification

The 3 months correlation between Seadrill and SPACE is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and SPACE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPACE 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 SPACE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPACE has no effect on the direction of Seadrill i.e., Seadrill and SPACE go up and down completely randomly.

Pair Corralation between Seadrill and SPACE

Given the investment horizon of 90 days Seadrill Limited is expected to generate 0.4 times more return on investment than SPACE. However, Seadrill Limited is 2.52 times less risky than SPACE. It trades about -0.25 of its potential returns per unit of risk. SPACE is currently generating about -0.12 per unit of risk. If you would invest  3,835  in Seadrill Limited on December 29, 2024 and sell it today you would lose (1,294) from holding Seadrill Limited or give up 33.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.31%
Values	Daily Returns

Seadrill Limited  vs.  SPACE

Seadrill Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

SPACE

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPACE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for SPACE shareholders.

Pair Trading with Seadrill and SPACE

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

The idea behind Seadrill Limited and SPACE 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.