Correlation Between Seadrill and Quantum BioPharma

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

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

Diversification Opportunities for Seadrill and Quantum BioPharma

0.25

Correlation Coefficient

Seadrill  Quantum BioPharma

Modest diversification

The 3 months correlation between Seadrill and Quantum is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Quantum BioPharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantum BioPharma 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 Quantum BioPharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantum BioPharma has no effect on the direction of Seadrill i.e., Seadrill and Quantum BioPharma go up and down completely randomly.

Pair Corralation between Seadrill and Quantum BioPharma

Given the investment horizon of 90 days Seadrill Limited is expected to generate 0.32 times more return on investment than Quantum BioPharma. However, Seadrill Limited is 3.08 times less risky than Quantum BioPharma. It trades about 0.1 of its potential returns per unit of risk. Quantum BioPharma is currently generating about 0.02 per unit of risk. If you would invest  3,671  in Seadrill Limited on October 26, 2024 and sell it today you would earn a total of  114.00  from holding Seadrill Limited or generate 3.11% return on investment over 90 days.

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

Seadrill Limited  vs.  Quantum BioPharma

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 quite persistent basic indicators, Seadrill is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Quantum BioPharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantum BioPharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Seadrill and Quantum BioPharma

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

The idea behind Seadrill Limited and Quantum BioPharma 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.