Correlation Between Valaris and Oceaneering International

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

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

Diversification Opportunities for Valaris and Oceaneering International

0.87

Correlation Coefficient

Valaris  Oceaneering International

Very poor diversification

The 3 months correlation between Valaris and Oceaneering is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Valaris and Oceaneering International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oceaneering International and Valaris 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 Valaris are associated (or correlated) with Oceaneering International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oceaneering International has no effect on the direction of Valaris i.e., Valaris and Oceaneering International go up and down completely randomly.

Pair Corralation between Valaris and Oceaneering International

Considering the 90-day investment horizon Valaris is expected to generate 1.2 times more return on investment than Oceaneering International. However, Valaris is 1.2 times more volatile than Oceaneering International. It trades about -0.03 of its potential returns per unit of risk. Oceaneering International is currently generating about -0.11 per unit of risk. If you would invest  4,288  in Valaris on December 30, 2024 and sell it today you would lose (341.00) from holding Valaris or give up 7.95% of portfolio value over 90 days.

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

Valaris  vs.  Oceaneering International

Valaris

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valaris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Valaris is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Oceaneering International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oceaneering International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Valaris and Oceaneering International

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

The idea behind Valaris and Oceaneering International 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.