Correlation Between Seadrill and Sinopec Oilfield

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

Diversification Opportunities for Seadrill and Sinopec Oilfield

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Seadrill and Sinopec is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Sinopec Oilfield Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Oilfield Service 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 Sinopec Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Oilfield Service has no effect on the direction of Seadrill i.e., Seadrill and Sinopec Oilfield go up and down completely randomly.

Pair Corralation between Seadrill and Sinopec Oilfield

If you would invest  3,567  in Seadrill Limited on October 23, 2024 and sell it today you would earn a total of  223.00  from holding Seadrill Limited or generate 6.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy94.74%
ValuesDaily Returns

Seadrill Limited  vs.  Sinopec Oilfield Service

 Performance 
       Timeline  
Seadrill Limited 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 4 (%) 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 February 2025.
Sinopec Oilfield Service 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sinopec Oilfield Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Sinopec Oilfield is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Seadrill and Sinopec Oilfield Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Seadrill and Sinopec Oilfield

The main advantage of trading using opposite Seadrill and Sinopec Oilfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill position performs unexpectedly, Sinopec Oilfield 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 Sinopec Oilfield will offset losses from the drop in Sinopec Oilfield's long position.
The idea behind Seadrill Limited and Sinopec Oilfield Service 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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