Correlation Between AA Mission and Transocean

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

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

Diversification Opportunities for AA Mission and Transocean

0.76

Correlation Coefficient

AA Mission  Transocean

Poor diversification

The 3 months correlation between AAM and Transocean is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding AA Mission Acquisition and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and AA Mission 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 AA Mission Acquisition 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 AA Mission i.e., AA Mission and Transocean go up and down completely randomly.

Pair Corralation between AA Mission and Transocean

Considering the 90-day investment horizon AA Mission is expected to generate 9.56 times less return on investment than Transocean. But when comparing it to its historical volatility, AA Mission Acquisition is 26.76 times less risky than Transocean. It trades about 0.19 of its potential returns per unit of risk. Transocean is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  228.00  in Transocean on April 17, 2025 and sell it today you would earn a total of  27.50  from holding Transocean or generate 12.06% return on investment over 90 days.

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

AA Mission Acquisition  vs.  Transocean

AA Mission Acquisition

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AA Mission Acquisition are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AA Mission is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Transocean

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transocean are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward indicators, Transocean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AA Mission and Transocean

The main advantage of trading using opposite AA Mission and Transocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AA Mission 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 AA Mission Acquisition 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.