Correlation Between AKITA Drilling and Balchem

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

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

Diversification Opportunities for AKITA Drilling and Balchem

-0.52

Correlation Coefficient

AKITA Drilling  Balchem

Excellent diversification

The 3 months correlation between AKITA and Balchem is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem 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 Balchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balchem has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and Balchem go up and down completely randomly.

Pair Corralation between AKITA Drilling and Balchem

Assuming the 90 days horizon AKITA Drilling is expected to generate 2.04 times more return on investment than Balchem. However, AKITA Drilling is 2.04 times more volatile than Balchem. It trades about 0.11 of its potential returns per unit of risk. Balchem is currently generating about 0.0 per unit of risk. If you would invest  115.00  in AKITA Drilling on December 20, 2024 and sell it today you would earn a total of  20.00  from holding AKITA Drilling or generate 17.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

AKITA Drilling  vs.  Balchem

AKITA Drilling

Risk-Adjusted Performance

Modest

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. Despite nearly fragile basic indicators, AKITA Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Balchem

Risk-Adjusted Performance

Very Weak

Over the last 90 days Balchem has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Balchem is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AKITA Drilling and Balchem

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

The idea behind AKITA Drilling and Balchem 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 Transaction History module to view history of all your transactions and understand their impact on performance.