Correlation Between Seadrill and LENSAR

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

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

Diversification Opportunities for Seadrill and LENSAR

0.17

Correlation Coefficient

Seadrill  LENSAR

Average diversification

The 3 months correlation between Seadrill and LENSAR is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and LENSAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENSAR Inc 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 LENSAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENSAR Inc has no effect on the direction of Seadrill i.e., Seadrill and LENSAR go up and down completely randomly.

Pair Corralation between Seadrill and LENSAR

Given the investment horizon of 90 days Seadrill is expected to generate 20.93 times less return on investment than LENSAR. But when comparing it to its historical volatility, Seadrill Limited is 2.01 times less risky than LENSAR. It trades about 0.01 of its potential returns per unit of risk. LENSAR Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  502.00  in LENSAR Inc on September 12, 2024 and sell it today you would earn a total of  255.00  from holding LENSAR Inc or generate 50.8% return on investment over 90 days.

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

Seadrill Limited  vs.  LENSAR Inc

Seadrill Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 1 (%) 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 latest stock price mess, may contribute to short-term losses for the institutional investors.

LENSAR Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seadrill and LENSAR

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

The idea behind Seadrill Limited and LENSAR Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.