Correlation Between AKITA Drilling and Cathedral Energy

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

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

Diversification Opportunities for AKITA Drilling and Cathedral Energy

0.04

Correlation Coefficient

AKITA Drilling  Cathedral Energy

Significant diversification

The 3 months correlation between AKITA and Cathedral is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and Cathedral Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathedral Energy Services 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 Cathedral Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathedral Energy Services has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and Cathedral Energy go up and down completely randomly.

Pair Corralation between AKITA Drilling and Cathedral Energy

Assuming the 90 days horizon AKITA Drilling is expected to generate 0.84 times more return on investment than Cathedral Energy. However, AKITA Drilling is 1.19 times less risky than Cathedral Energy. It trades about 0.02 of its potential returns per unit of risk. Cathedral Energy Services is currently generating about -0.01 per unit of risk. If you would invest  106.00  in AKITA Drilling on November 30, 2024 and sell it today you would earn a total of  2.00  from holding AKITA Drilling or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.55%
Values	Daily Returns

AKITA Drilling  vs.  Cathedral Energy Services

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 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.

Cathedral Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cathedral Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AKITA Drilling and Cathedral Energy

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

The idea behind AKITA Drilling and Cathedral Energy Services 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.