Correlation Between Seadrill and Spectrum Technology

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

By analyzing existing cross correlation between Seadrill Limited and Spectrum Technology, you can compare the effects of market volatilities on Seadrill and Spectrum Technology 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 Spectrum Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Spectrum Technology.

Diversification Opportunities for Seadrill and Spectrum Technology

-0.4

Correlation Coefficient

Seadrill  Spectrum Technology

Very good diversification

The 3 months correlation between Seadrill and Spectrum is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited and Spectrum Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Technology 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 Spectrum Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Technology has no effect on the direction of Seadrill i.e., Seadrill and Spectrum Technology go up and down completely randomly.

Pair Corralation between Seadrill and Spectrum Technology

Given the investment horizon of 90 days Seadrill is expected to generate 192.4 times less return on investment than Spectrum Technology. But when comparing it to its historical volatility, Seadrill Limited is 74.39 times less risky than Spectrum Technology. It trades about 0.08 of its potential returns per unit of risk. Spectrum Technology is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Spectrum Technology on May 20, 2025 and sell it today you would earn a total of  0.00  from holding Spectrum Technology or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Seadrill Limited  vs.  Spectrum Technology

Seadrill Limited

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 10 (%) 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.

Spectrum Technology

Risk-Adjusted Performance

Weakest

Over the last 90 days Spectrum Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in September 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Seadrill and Spectrum Technology

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

The idea behind Seadrill Limited and Spectrum Technology 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.