Correlation Between AKITA Drilling and STEP Energy
Can any of the company-specific risk be diversified away by investing in both AKITA Drilling and STEP 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 AKITA Drilling and STEP Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AKITA Drilling and STEP Energy Services, you can compare the effects of market volatilities on AKITA Drilling and STEP 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 AKITA Drilling with a short position of STEP Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AKITA Drilling and STEP Energy.
Diversification Opportunities for AKITA Drilling and STEP Energy
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AKITA and STEP is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and STEP Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEP Energy Services 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 STEP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEP Energy Services has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and STEP Energy go up and down completely randomly.
Pair Corralation between AKITA Drilling and STEP Energy
Assuming the 90 days trading horizon AKITA Drilling is expected to generate 2.04 times less return on investment than STEP Energy. But when comparing it to its historical volatility, AKITA Drilling is 1.45 times less risky than STEP Energy. It trades about 0.04 of its potential returns per unit of risk. STEP Energy Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 363.00 in STEP Energy Services on September 4, 2024 and sell it today you would earn a total of 144.00 from holding STEP Energy Services or generate 39.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AKITA Drilling vs. STEP Energy Services
Performance |
| Timeline |
| AKITA Drilling |
| STEP Energy Services |
AKITA Drilling and STEP Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AKITA Drilling and STEP Energy
The main advantage of trading using opposite AKITA Drilling and STEP Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AKITA Drilling position performs unexpectedly, STEP 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 STEP Energy will offset losses from the drop in STEP Energy's long position.| AKITA Drilling vs. STEP Energy Services | AKITA Drilling vs. Southern Energy Corp | AKITA Drilling vs. PHX Energy Services | AKITA Drilling vs. iShares Canadian HYBrid |
| STEP Energy vs. Trican Well Service | STEP Energy vs. Calfrac Well Services | STEP Energy vs. Source Energy Services | STEP Energy vs. CES Energy Solutions |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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