Correlation Between Pool and AKITA Drilling
Can any of the company-specific risk be diversified away by investing in both Pool 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 Pool and AKITA Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pool Corporation and AKITA Drilling, you can compare the effects of market volatilities on Pool 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 Pool with a short position of AKITA Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and AKITA Drilling.
Diversification Opportunities for Pool and AKITA Drilling
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pool and AKITA is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and Pool 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 Pool Corporation 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 Pool i.e., Pool and AKITA Drilling go up and down completely randomly.
Pair Corralation between Pool and AKITA Drilling
Given the investment horizon of 90 days Pool Corporation is expected to generate 1.48 times more return on investment than AKITA Drilling. However, Pool is 1.48 times more volatile than AKITA Drilling. It trades about 0.13 of its potential returns per unit of risk. AKITA Drilling is currently generating about 0.01 per unit of risk. If you would invest 35,888 in Pool Corporation on September 3, 2024 and sell it today you would earn a total of 1,821 from holding Pool Corporation or generate 5.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Pool Corp. vs. AKITA Drilling
Performance |
| Timeline |
| Pool |
| AKITA Drilling |
Pool and AKITA Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and AKITA Drilling
The main advantage of trading using opposite Pool and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool 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 Pool Corporation 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. Seadrill Limited | AKITA Drilling vs. Noble plc | AKITA Drilling vs. Borr Drilling | AKITA Drilling vs. SCOR PK |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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