Correlation Between AKITA Drilling and Grocery Outlet

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

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

Diversification Opportunities for AKITA Drilling and Grocery Outlet

0.08

Correlation Coefficient

AKITA Drilling  Grocery Outlet

Significant diversification

The 3 months correlation between AKITA and Grocery is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and Grocery Outlet Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grocery Outlet Holding 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 Grocery Outlet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grocery Outlet Holding has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and Grocery Outlet go up and down completely randomly.

Pair Corralation between AKITA Drilling and Grocery Outlet

Assuming the 90 days horizon AKITA Drilling is expected to generate 0.51 times more return on investment than Grocery Outlet. However, AKITA Drilling is 1.96 times less risky than Grocery Outlet. It trades about 0.13 of its potential returns per unit of risk. Grocery Outlet Holding is currently generating about -0.02 per unit of risk. If you would invest  111.00  in AKITA Drilling on December 28, 2024 and sell it today you would earn a total of  23.00  from holding AKITA Drilling or generate 20.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

AKITA Drilling  vs.  Grocery Outlet Holding

AKITA Drilling

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, AKITA Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Grocery Outlet Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AKITA Drilling and Grocery Outlet

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

The idea behind AKITA Drilling and Grocery Outlet Holding 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.