Correlation Between Seadrill and MARRIOTT

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

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

Diversification Opportunities for Seadrill and MARRIOTT

0.4

Correlation Coefficient

Seadrill  MARRIOTT

Very weak diversification

The 3 months correlation between Seadrill and MARRIOTT is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and MARRIOTT INTL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARRIOTT INTL INC 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 MARRIOTT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARRIOTT INTL INC has no effect on the direction of Seadrill i.e., Seadrill and MARRIOTT go up and down completely randomly.

Pair Corralation between Seadrill and MARRIOTT

Given the investment horizon of 90 days Seadrill Limited is expected to generate 2.9 times more return on investment than MARRIOTT. However, Seadrill is 2.9 times more volatile than MARRIOTT INTL INC. It trades about -0.01 of its potential returns per unit of risk. MARRIOTT INTL INC is currently generating about -0.29 per unit of risk. If you would invest  3,903  in Seadrill Limited on October 8, 2024 and sell it today you would lose (29.00) from holding Seadrill Limited or give up 0.74% of portfolio value over 90 days.

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

Seadrill Limited  vs.  MARRIOTT INTL INC

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.

MARRIOTT INTL INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARRIOTT INTL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MARRIOTT is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Seadrill and MARRIOTT

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

The idea behind Seadrill Limited and MARRIOTT INTL INC 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.