Correlation Between Simon Property and Seadrill

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

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

Diversification Opportunities for Simon Property and Seadrill

0.46

Correlation Coefficient

Simon Property  Seadrill

Very weak diversification

The 3 months correlation between Simon and Seadrill is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Simon Property 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 Simon Property Group are associated (or correlated) with Seadrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seadrill Limited has no effect on the direction of Simon Property i.e., Simon Property and Seadrill go up and down completely randomly.

Pair Corralation between Simon Property and Seadrill

Considering the 90-day investment horizon Simon Property is expected to generate 3.78 times less return on investment than Seadrill. But when comparing it to its historical volatility, Simon Property Group is 2.11 times less risky than Seadrill. It trades about 0.02 of its potential returns per unit of risk. Seadrill Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,607  in Seadrill Limited on October 21, 2024 and sell it today you would earn a total of  145.00  from holding Seadrill Limited or generate 4.02% return on investment over 90 days.

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

Simon Property Group  vs.  Seadrill Limited

Simon Property Group

Risk-Adjusted Performance

1 of 100

Weak

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

Seadrill Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Simon Property and Seadrill

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

The idea behind Simon Property Group and Seadrill Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.