Correlation Between AKITA Drilling and Microsoft Corp

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Can any of the company-specific risk be diversified away by investing in both AKITA Drilling and Microsoft Corp 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 Microsoft Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AKITA Drilling and Microsoft Corp CDR, you can compare the effects of market volatilities on AKITA Drilling and Microsoft Corp 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 Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AKITA Drilling and Microsoft Corp.

Diversification Opportunities for AKITA Drilling and Microsoft Corp

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between AKITA and Microsoft is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and Microsoft Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp CDR 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 Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp CDR has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and Microsoft Corp go up and down completely randomly.

Pair Corralation between AKITA Drilling and Microsoft Corp

Assuming the 90 days trading horizon AKITA Drilling is expected to generate 3.57 times less return on investment than Microsoft Corp. In addition to that, AKITA Drilling is 2.23 times more volatile than Microsoft Corp CDR. It trades about 0.01 of its total potential returns per unit of risk. Microsoft Corp CDR is currently generating about 0.09 per unit of volatility. If you would invest  1,713  in Microsoft Corp CDR on October 10, 2024 and sell it today you would earn a total of  1,369  from holding Microsoft Corp CDR or generate 79.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

AKITA Drilling  vs.  Microsoft Corp CDR

 Performance 
       Timeline  
AKITA Drilling 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, AKITA Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.
Microsoft Corp CDR 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

AKITA Drilling and Microsoft Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AKITA Drilling and Microsoft Corp

The main advantage of trading using opposite AKITA Drilling and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AKITA Drilling position performs unexpectedly, Microsoft Corp 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 Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.
The idea behind AKITA Drilling and Microsoft Corp CDR 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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