Correlation Between Seadrill and Jacobs Solutions

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

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

Diversification Opportunities for Seadrill and Jacobs Solutions

0.08

Correlation Coefficient

Seadrill  Jacobs Solutions

Significant diversification

The 3 months correlation between Seadrill and Jacobs is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions 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 Jacobs Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacobs Solutions has no effect on the direction of Seadrill i.e., Seadrill and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Seadrill and Jacobs Solutions

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Jacobs Solutions. In addition to that, Seadrill is 2.0 times more volatile than Jacobs Solutions. It trades about -0.28 of its total potential returns per unit of risk. Jacobs Solutions is currently generating about -0.24 per unit of volatility. If you would invest  14,123  in Jacobs Solutions on September 30, 2024 and sell it today you would lose (616.00) from holding Jacobs Solutions or give up 4.36% 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.  Jacobs Solutions

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.

Jacobs Solutions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady forward-looking indicators, Jacobs Solutions is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Seadrill and Jacobs Solutions

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

The idea behind Seadrill Limited and Jacobs Solutions 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.