Correlation Between Vantage Drilling and Transocean

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

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

Diversification Opportunities for Vantage Drilling and Transocean

0.23

Correlation Coefficient

Vantage Drilling  Transocean

Modest diversification

The 3 months correlation between Vantage and Transocean is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Vantage Drilling International and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Vantage Drilling 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 Vantage Drilling International are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Vantage Drilling i.e., Vantage Drilling and Transocean go up and down completely randomly.

Pair Corralation between Vantage Drilling and Transocean

Assuming the 90 days horizon Vantage Drilling International is expected to under-perform the Transocean. In addition to that, Vantage Drilling is 1.95 times more volatile than Transocean. It trades about -0.13 of its total potential returns per unit of risk. Transocean is currently generating about -0.02 per unit of volatility. If you would invest  347.00  in Transocean on December 22, 2024 and sell it today you would lose (28.00) from holding Transocean or give up 8.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Vantage Drilling International  vs.  Transocean

Vantage Drilling Int

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vantage Drilling International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Transocean

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vantage Drilling and Transocean

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

The idea behind Vantage Drilling International and Transocean 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.