Correlation Between GM and AKITA Drilling
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and AKITA Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and AKITA Drilling, you can compare the effects of market volatilities on GM 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 GM with a short position of AKITA Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and AKITA Drilling.
Diversification Opportunities for GM and AKITA Drilling
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and AKITA is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and GM 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 General Motors 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 GM i.e., GM and AKITA Drilling go up and down completely randomly.
Pair Corralation between GM and AKITA Drilling
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the AKITA Drilling. In addition to that, GM is 2.4 times more volatile than AKITA Drilling. It trades about -0.05 of its total potential returns per unit of risk. AKITA Drilling is currently generating about -0.1 per unit of volatility. If you would invest 168.00 in AKITA Drilling on November 3, 2024 and sell it today you would lose (5.00) from holding AKITA Drilling or give up 2.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
General Motors vs. AKITA Drilling
Performance |
| Timeline |
| General Motors |
| AKITA Drilling |
GM and AKITA Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and AKITA Drilling
The main advantage of trading using opposite GM and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 | AKITA Drilling vs. Western 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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