Correlation Between AKITA Drilling and BRP

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

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

Diversification Opportunities for AKITA Drilling and BRP

-0.51

Correlation Coefficient

AKITA Drilling  BRP

Excellent diversification

The 3 months correlation between AKITA and BRP is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and BRP go up and down completely randomly.

Pair Corralation between AKITA Drilling and BRP

Assuming the 90 days horizon AKITA Drilling is expected to generate 1.35 times more return on investment than BRP. However, AKITA Drilling is 1.35 times more volatile than BRP Inc. It trades about 0.01 of its potential returns per unit of risk. BRP Inc is currently generating about -0.02 per unit of risk. If you would invest  129.00  in AKITA Drilling on September 18, 2024 and sell it today you would lose (14.00) from holding AKITA Drilling or give up 10.85% of portfolio value over 90 days.

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

AKITA Drilling  vs.  BRP Inc

AKITA Drilling

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, AKITA Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with AKITA Drilling and BRP

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

The idea behind AKITA Drilling and BRP Inc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.