Correlation Between AKITA Drilling and GMS

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

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

Diversification Opportunities for AKITA Drilling and GMS

0.4

Correlation Coefficient

AKITA Drilling  GMS

Very weak diversification

The 3 months correlation between AKITA and GMS is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS 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 GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and GMS go up and down completely randomly.

Pair Corralation between AKITA Drilling and GMS

Assuming the 90 days horizon AKITA Drilling is expected to generate 1.38 times more return on investment than GMS. However, AKITA Drilling is 1.38 times more volatile than GMS Inc. It trades about 0.02 of its potential returns per unit of risk. GMS Inc is currently generating about 0.03 per unit of risk. If you would invest  103.00  in AKITA Drilling on September 30, 2024 and sell it today you would earn a total of  8.00  from holding AKITA Drilling or generate 7.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

AKITA Drilling  vs.  GMS Inc

AKITA Drilling

Risk-Adjusted Performance

0 of 100

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.

GMS Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, GMS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AKITA Drilling and GMS

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

The idea behind AKITA Drilling and GMS 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.