Correlation Between Anglo American and AKITA Drilling

Can any of the company-specific risk be diversified away by investing in both Anglo American 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 Anglo American and AKITA Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anglo American Platinum and AKITA Drilling, you can compare the effects of market volatilities on Anglo American 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 Anglo American with a short position of AKITA Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and AKITA Drilling.

Diversification Opportunities for Anglo American and AKITA Drilling

0.35

Correlation Coefficient

Anglo American  AKITA Drilling

Weak diversification

The 3 months correlation between Anglo and AKITA is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and Anglo American 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 Anglo American Platinum 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 Anglo American i.e., Anglo American and AKITA Drilling go up and down completely randomly.

Pair Corralation between Anglo American and AKITA Drilling

Assuming the 90 days horizon Anglo American is expected to generate 1.32 times less return on investment than AKITA Drilling. In addition to that, Anglo American is 1.49 times more volatile than AKITA Drilling. It trades about 0.04 of its total potential returns per unit of risk. AKITA Drilling is currently generating about 0.09 per unit of volatility. If you would invest  115.00  in AKITA Drilling on October 11, 2024 and sell it today you would earn a total of  3.00  from holding AKITA Drilling or generate 2.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Anglo American Platinum  vs.  AKITA Drilling

Anglo American Platinum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anglo American Platinum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AKITA Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AKITA Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AKITA Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Anglo American and AKITA Drilling

The main advantage of trading using opposite Anglo American and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American 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 Anglo American Platinum 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.