Correlation Between CROWN and Seadrill

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

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

Diversification Opportunities for CROWN and Seadrill

0.43

Correlation Coefficient

CROWN  Seadrill

Very weak diversification

The 3 months correlation between CROWN and Seadrill is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CROWN CASTLE INTERNATIONAL and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and CROWN 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 CROWN CASTLE INTERNATIONAL 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 CROWN i.e., CROWN and Seadrill go up and down completely randomly.

Pair Corralation between CROWN and Seadrill

Assuming the 90 days trading horizon CROWN CASTLE INTERNATIONAL is expected to generate 0.14 times more return on investment than Seadrill. However, CROWN CASTLE INTERNATIONAL is 7.17 times less risky than Seadrill. It trades about -0.02 of its potential returns per unit of risk. Seadrill Limited is currently generating about -0.01 per unit of risk. If you would invest  9,257  in CROWN CASTLE INTERNATIONAL on October 6, 2024 and sell it today you would lose (46.00) from holding CROWN CASTLE INTERNATIONAL or give up 0.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.16%
Values	Daily Returns

CROWN CASTLE INTERNATIONAL  vs.  Seadrill Limited

CROWN CASTLE INTERNA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CROWN CASTLE INTERNATIONAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CROWN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CROWN and Seadrill

The main advantage of trading using opposite CROWN and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CROWN 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 CROWN CASTLE INTERNATIONAL 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.