Correlation Between E Split and AKITA Drilling
Can any of the company-specific risk be diversified away by investing in both E Split and AKITA Drilling 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 E Split and AKITA Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E Split Corp and AKITA Drilling, you can compare the effects of market volatilities on E Split and AKITA Drilling 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 E Split with a short position of AKITA Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Split and AKITA Drilling.
Diversification Opportunities for E Split and AKITA Drilling
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ENS-PA and AKITA is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding E Split Corp and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and E Split 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 E Split Corp are associated (or correlated) with AKITA Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKITA Drilling has no effect on the direction of E Split i.e., E Split and AKITA Drilling go up and down completely randomly.
Pair Corralation between E Split and AKITA Drilling
Assuming the 90 days trading horizon E Split is expected to generate 1.65 times less return on investment than AKITA Drilling. But when comparing it to its historical volatility, E Split Corp is 5.39 times less risky than AKITA Drilling. It trades about 0.12 of its potential returns per unit of risk. AKITA Drilling is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 129.00 in AKITA Drilling on August 28, 2024 and sell it today you would earn a total of 33.00 from holding AKITA Drilling or generate 25.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
E Split Corp vs. AKITA Drilling
Performance |
| Timeline |
| E Split Corp |
| AKITA Drilling |
E Split and AKITA Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E Split and AKITA Drilling
The main advantage of trading using opposite E Split and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Split position performs unexpectedly, AKITA Drilling 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 AKITA Drilling will offset losses from the drop in AKITA Drilling's long position.The idea behind E Split Corp and AKITA Drilling 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.| AKITA Drilling vs. Ensign Energy Services | AKITA Drilling vs. Total Energy Services | AKITA Drilling vs. PHX Energy Services |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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