Correlation Between Seadrill and Zijin Mining

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

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

Diversification Opportunities for Seadrill and Zijin Mining

-0.4

Correlation Coefficient

Seadrill  Zijin Mining

Very good diversification

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

Pair Corralation between Seadrill and Zijin Mining

Given the investment horizon of 90 days Seadrill Limited is expected to under-perform the Zijin Mining. But the stock apears to be less risky and, when comparing its historical volatility, Seadrill Limited is 1.48 times less risky than Zijin Mining. The stock trades about -0.01 of its potential returns per unit of risk. The Zijin Mining Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Zijin Mining Group on September 16, 2024 and sell it today you would earn a total of  3.00  from holding Zijin Mining Group or generate 1.61% return on investment over 90 days.

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

Seadrill Limited  vs.  Zijin Mining 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 quite persistent basic indicators, Seadrill is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Zijin Mining Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Zijin Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Seadrill and Zijin Mining

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

The idea behind Seadrill Limited and Zijin Mining 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.