Correlation Between Tourmaline Oil and Seadrill

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

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

Diversification Opportunities for Tourmaline Oil and Seadrill

-0.21

Correlation Coefficient

Tourmaline Oil  Seadrill

Very good diversification

The 3 months correlation between Tourmaline and Seadrill is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Tourmaline Oil Corp and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Tourmaline Oil 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 Tourmaline Oil Corp 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 Tourmaline Oil i.e., Tourmaline Oil and Seadrill go up and down completely randomly.

Pair Corralation between Tourmaline Oil and Seadrill

Assuming the 90 days horizon Tourmaline Oil Corp is expected to generate 0.85 times more return on investment than Seadrill. However, Tourmaline Oil Corp is 1.18 times less risky than Seadrill. It trades about 0.0 of its potential returns per unit of risk. Seadrill Limited is currently generating about -0.34 per unit of risk. If you would invest  4,660  in Tourmaline Oil Corp on December 1, 2024 and sell it today you would lose (65.00) from holding Tourmaline Oil Corp or give up 1.39% of portfolio value over 90 days.

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

Tourmaline Oil Corp  vs.  Seadrill Limited

Tourmaline Oil Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tourmaline Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Tourmaline Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Seadrill Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Tourmaline Oil and Seadrill

The main advantage of trading using opposite Tourmaline Oil and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tourmaline Oil 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 Tourmaline Oil Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.