Correlation Between Seadrill and Lion One
Can any of the company-specific risk be diversified away by investing in both Seadrill and Lion One 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 Lion One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seadrill Limited and Lion One Metals, you can compare the effects of market volatilities on Seadrill and Lion One 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 Lion One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Lion One.
Diversification Opportunities for Seadrill and Lion One
Very good diversification
The 3 months correlation between Seadrill and Lion is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Lion One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion One Metals 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 Lion One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion One Metals has no effect on the direction of Seadrill i.e., Seadrill and Lion One go up and down completely randomly.
Pair Corralation between Seadrill and Lion One
Given the investment horizon of 90 days Seadrill Limited is expected to generate 0.61 times more return on investment than Lion One. However, Seadrill Limited is 1.65 times less risky than Lion One. It trades about 0.02 of its potential returns per unit of risk. Lion One Metals is currently generating about -0.05 per unit of risk. If you would invest 3,518 in Seadrill Limited on September 8, 2024 and sell it today you would earn a total of 319.00 from holding Seadrill Limited or generate 9.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Seadrill Limited vs. Lion One Metals
Performance |
Timeline |
Seadrill Limited |
Lion One Metals |
Seadrill and Lion One Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Seadrill and Lion One
The main advantage of trading using opposite Seadrill and Lion One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, Lion One 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 Lion One will offset losses from the drop in Lion One's long position.Seadrill vs. Nabors Industries | Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc |
Lion One vs. Morningstar Unconstrained Allocation | Lion One vs. Jpmorgan Equity Index | Lion One vs. Knife River | Lion One vs. Goldman Sachs Future |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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