Correlation Between AKITA Drilling and North American
Can any of the company-specific risk be diversified away by investing in both AKITA Drilling and North American 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 AKITA Drilling and North American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AKITA Drilling and North American Financial, you can compare the effects of market volatilities on AKITA Drilling and North American 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 AKITA Drilling with a short position of North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of AKITA Drilling and North American.
Diversification Opportunities for AKITA Drilling and North American
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AKITA and North is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial and AKITA 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 AKITA Drilling are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and North American go up and down completely randomly.
Pair Corralation between AKITA Drilling and North American
Assuming the 90 days trading horizon AKITA Drilling is expected to generate 4.96 times less return on investment than North American. In addition to that, AKITA Drilling is 1.33 times more volatile than North American Financial. It trades about 0.01 of its total potential returns per unit of risk. North American Financial is currently generating about 0.07 per unit of volatility. If you would invest 406.00 in North American Financial on September 3, 2024 and sell it today you would earn a total of 346.00 from holding North American Financial or generate 85.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AKITA Drilling vs. North American Financial
Performance |
| Timeline |
| AKITA Drilling |
| North American Financial |
AKITA Drilling and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AKITA Drilling and North American
The main advantage of trading using opposite AKITA Drilling and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AKITA Drilling position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.The idea behind AKITA Drilling and North American Financial 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.| North American vs. Dividend Growth Split | North American vs. Dividend 15 Split | North American vs. Financial 15 Split | North American vs. Dividend 15 Split |
Check out your portfolio center.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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