Correlation Between AKITA Drilling and Bowhead Specialty

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

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

Diversification Opportunities for AKITA Drilling and Bowhead Specialty

-0.41

Correlation Coefficient

AKITA Drilling  Bowhead Specialty

Very good diversification

The 3 months correlation between AKITA and Bowhead is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and Bowhead Specialty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowhead Specialty 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 Bowhead Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowhead Specialty has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and Bowhead Specialty go up and down completely randomly.

Pair Corralation between AKITA Drilling and Bowhead Specialty

Assuming the 90 days horizon AKITA Drilling is expected to under-perform the Bowhead Specialty. But the pink sheet apears to be less risky and, when comparing its historical volatility, AKITA Drilling is 1.19 times less risky than Bowhead Specialty. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Bowhead Specialty Holdings is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,670  in Bowhead Specialty Holdings on December 4, 2024 and sell it today you would lose (211.00) from holding Bowhead Specialty Holdings or give up 5.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

AKITA Drilling  vs.  Bowhead Specialty Holdings

AKITA Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days AKITA Drilling 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.

Bowhead Specialty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bowhead Specialty Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Bowhead Specialty is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with AKITA Drilling and Bowhead Specialty

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

The idea behind AKITA Drilling and Bowhead Specialty Holdings 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.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.