Correlation Between Seadrill and Tigo Energy

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

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

Diversification Opportunities for Seadrill and Tigo Energy

-0.01

Correlation Coefficient

Seadrill  Tigo Energy

Good diversification

The 3 months correlation between Seadrill and Tigo is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Tigo Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigo Energy 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 Tigo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigo Energy has no effect on the direction of Seadrill i.e., Seadrill and Tigo Energy go up and down completely randomly.

Pair Corralation between Seadrill and Tigo Energy

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Tigo Energy. But the stock apears to be less risky and, when comparing its historical volatility, Seadrill Limited is 2.62 times less risky than Tigo Energy. The stock trades about -0.06 of its potential returns per unit of risk. The Tigo Energy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  83.00  in Tigo Energy on October 6, 2024 and sell it today you would earn a total of  11.00  from holding Tigo Energy or generate 13.25% return on investment over 90 days.

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

Seadrill Limited  vs.  Tigo Energy

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.

Tigo Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tigo Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental 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 Tigo Energy

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

The idea behind Seadrill Limited and Tigo Energy 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.