Correlation Between Seadrill and Nabors Energy

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

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

Diversification Opportunities for Seadrill and Nabors Energy

0.65

Correlation Coefficient

Seadrill  Nabors Energy

Poor diversification

The 3 months correlation between Seadrill and Nabors is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Nabors Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Energy Transition and Seadrill 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 Seadrill Limited are associated (or correlated) with Nabors Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Energy Transition has no effect on the direction of Seadrill i.e., Seadrill and Nabors Energy go up and down completely randomly.

Pair Corralation between Seadrill and Nabors Energy

Given the investment horizon of 90 days Seadrill Limited is expected to generate 8.3 times more return on investment than Nabors Energy. However, Seadrill is 8.3 times more volatile than Nabors Energy Transition. It trades about 0.1 of its potential returns per unit of risk. Nabors Energy Transition is currently generating about 0.1 per unit of risk. If you would invest  2,483  in Seadrill Limited on May 15, 2025 and sell it today you would earn a total of  400.00  from holding Seadrill Limited or generate 16.11% return on investment over 90 days.

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

Seadrill Limited  vs.  Nabors Energy Transition

Seadrill Limited

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Seadrill disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nabors Energy Transition

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Energy Transition are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Nabors Energy is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Seadrill and Nabors Energy

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

The idea behind Seadrill Limited and Nabors Energy Transition 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.