Correlation Between Seadrill and Sandstorm Gold

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

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

Diversification Opportunities for Seadrill and Sandstorm Gold

0.1

Correlation Coefficient

Seadrill  Sandstorm Gold

Average diversification

The 3 months correlation between Seadrill and Sandstorm is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold 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 Sandstorm Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandstorm Gold has no effect on the direction of Seadrill i.e., Seadrill and Sandstorm Gold go up and down completely randomly.

Pair Corralation between Seadrill and Sandstorm Gold

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Sandstorm Gold. But the stock apears to be less risky and, when comparing its historical volatility, Seadrill Limited is 1.14 times less risky than Sandstorm Gold. The stock trades about -0.28 of its potential returns per unit of risk. The Sandstorm Gold Ltd is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  579.00  in Sandstorm Gold Ltd on September 30, 2024 and sell it today you would lose (32.00) from holding Sandstorm Gold Ltd or give up 5.53% 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.  Sandstorm Gold Ltd

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.

Sandstorm Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandstorm Gold Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Seadrill and Sandstorm Gold

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

The idea behind Seadrill Limited and Sandstorm Gold Ltd 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.