Correlation Between Sinclair and Seadrill

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

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

Diversification Opportunities for Sinclair and Seadrill

-0.42

Correlation Coefficient

Sinclair  Seadrill

Very good diversification

The 3 months correlation between Sinclair and Seadrill is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sinclair Television Group and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Sinclair 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 Sinclair Television 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 Sinclair i.e., Sinclair and Seadrill go up and down completely randomly.

Pair Corralation between Sinclair and Seadrill

Assuming the 90 days trading horizon Sinclair Television Group is expected to generate 0.81 times more return on investment than Seadrill. However, Sinclair Television Group is 1.23 times less risky than Seadrill. It trades about 0.2 of its potential returns per unit of risk. Seadrill Limited is currently generating about 0.0 per unit of risk. If you would invest  6,038  in Sinclair Television Group on August 31, 2024 and sell it today you would earn a total of  1,512  from holding Sinclair Television Group or generate 25.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Sinclair Television Group  vs.  Seadrill Limited

Sinclair Television

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sinclair Television Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Sinclair sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Sinclair and Seadrill

The main advantage of trading using opposite Sinclair and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinclair 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 Sinclair Television 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.