Correlation Between Seadrill and Weibo Corp

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Can any of the company-specific risk be diversified away by investing in both Seadrill and Weibo Corp 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 Weibo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seadrill Limited and Weibo Corp, you can compare the effects of market volatilities on Seadrill and Weibo Corp 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 Weibo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Weibo Corp.

Diversification Opportunities for Seadrill and Weibo Corp

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between Seadrill and Weibo is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Seadrill i.e., Seadrill and Weibo Corp go up and down completely randomly.

Pair Corralation between Seadrill and Weibo Corp

Given the investment horizon of 90 days Seadrill Limited is expected to generate 0.76 times more return on investment than Weibo Corp. However, Seadrill Limited is 1.32 times less risky than Weibo Corp. It trades about 0.04 of its potential returns per unit of risk. Weibo Corp is currently generating about -0.01 per unit of risk. If you would invest  2,898  in Seadrill Limited on September 6, 2024 and sell it today you would earn a total of  1,120  from holding Seadrill Limited or generate 38.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Seadrill Limited  vs.  Weibo Corp

 Performance 
       Timeline  
Seadrill Limited 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Seadrill may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Weibo Corp 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Seadrill and Weibo Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Seadrill and Weibo Corp

The main advantage of trading using opposite Seadrill and Weibo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, Weibo Corp 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 Weibo Corp will offset losses from the drop in Weibo Corp's long position.
The idea behind Seadrill Limited and Weibo Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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