Correlation Between Seadrill and NETGEAR

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

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

Diversification Opportunities for Seadrill and NETGEAR

-0.13

Correlation Coefficient

Seadrill  NETGEAR

Good diversification

The 3 months correlation between Seadrill and NETGEAR is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Seadrill i.e., Seadrill and NETGEAR go up and down completely randomly.

Pair Corralation between Seadrill and NETGEAR

Given the investment horizon of 90 days Seadrill is expected to generate 2.46 times less return on investment than NETGEAR. But when comparing it to its historical volatility, Seadrill Limited is 1.26 times less risky than NETGEAR. It trades about 0.02 of its potential returns per unit of risk. NETGEAR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,936  in NETGEAR on September 29, 2024 and sell it today you would earn a total of  878.00  from holding NETGEAR or generate 45.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Seadrill Limited  vs.  NETGEAR

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.

NETGEAR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seadrill and NETGEAR

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

The idea behind Seadrill Limited and NETGEAR 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.