Correlation Between AKITA Drilling and Stepan
Can any of the company-specific risk be diversified away by investing in both AKITA Drilling and Stepan 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 Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AKITA Drilling and Stepan Company, you can compare the effects of market volatilities on AKITA Drilling and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of AKITA Drilling and Stepan.
Diversification Opportunities for AKITA Drilling and Stepan
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between AKITA and Stepan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and Stepan go up and down completely randomly.
Pair Corralation between AKITA Drilling and Stepan
Assuming the 90 days horizon AKITA Drilling is expected to under-perform the Stepan. But the pink sheet apears to be less risky and, when comparing its historical volatility, AKITA Drilling is 1.59 times less risky than Stepan. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Stepan Company is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 7,197 in Stepan Company on September 1, 2024 and sell it today you would earn a total of 493.00 from holding Stepan Company or generate 6.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
AKITA Drilling vs. Stepan Company
Performance |
| Timeline |
| AKITA Drilling |
| Stepan Company |
AKITA Drilling and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AKITA Drilling and Stepan
The main advantage of trading using opposite AKITA Drilling and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AKITA Drilling position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| AKITA Drilling vs. Cathedral Energy Services | AKITA Drilling vs. Vantage Drilling International | AKITA Drilling vs. Seadrill Limited | AKITA Drilling vs. Noble plc |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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