Correlation Between AKITA Drilling and Trican Well

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

By analyzing existing cross correlation between AKITA Drilling and Trican Well Service, you can compare the effects of market volatilities on AKITA Drilling and Trican Well 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 Trican Well. Check out your portfolio center. Please also check ongoing floating volatility patterns of AKITA Drilling and Trican Well.

Diversification Opportunities for AKITA Drilling and Trican Well

0.22

Correlation Coefficient

AKITA Drilling  Trican Well

Modest diversification

The 3 months correlation between AKITA and Trican is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and Trican Well Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trican Well Service 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 Trican Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trican Well Service has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and Trican Well go up and down completely randomly.

Pair Corralation between AKITA Drilling and Trican Well

Assuming the 90 days trading horizon AKITA Drilling is expected to generate 1.02 times less return on investment than Trican Well. In addition to that, AKITA Drilling is 1.22 times more volatile than Trican Well Service. It trades about 0.05 of its total potential returns per unit of risk. Trican Well Service is currently generating about 0.06 per unit of volatility. If you would invest  391.00  in Trican Well Service on September 13, 2024 and sell it today you would earn a total of  104.00  from holding Trican Well Service or generate 26.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AKITA Drilling  vs.  Trican Well Service

AKITA Drilling

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, AKITA Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Trican Well Service

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Trican Well Service are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Trican Well may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AKITA Drilling and Trican Well

The main advantage of trading using opposite AKITA Drilling and Trican Well positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AKITA Drilling position performs unexpectedly, Trican Well 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 Trican Well will offset losses from the drop in Trican Well's long position.

The idea behind AKITA Drilling and Trican Well Service 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.