Correlation Between Seadrill and Vishay Precision

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

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

Diversification Opportunities for Seadrill and Vishay Precision

-0.23

Correlation Coefficient

Seadrill  Vishay Precision

Very good diversification

The 3 months correlation between Seadrill and Vishay is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Vishay Precision Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Precision 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 Vishay Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vishay Precision has no effect on the direction of Seadrill i.e., Seadrill and Vishay Precision go up and down completely randomly.

Pair Corralation between Seadrill and Vishay Precision

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Vishay Precision. But the stock apears to be less risky and, when comparing its historical volatility, Seadrill Limited is 1.14 times less risky than Vishay Precision. The stock trades about -0.29 of its potential returns per unit of risk. The Vishay Precision Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,297  in Vishay Precision Group on September 29, 2024 and sell it today you would earn a total of  37.00  from holding Vishay Precision Group or generate 1.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Seadrill Limited  vs.  Vishay Precision Group

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.

Vishay Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vishay Precision Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Seadrill and Vishay Precision

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

The idea behind Seadrill Limited and Vishay Precision Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.