Correlation Between AKITA Drilling and ServiceNow

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

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

Diversification Opportunities for AKITA Drilling and ServiceNow

-0.19

Correlation Coefficient

AKITA Drilling  ServiceNow

Good diversification

The 3 months correlation between AKITA and ServiceNow is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow 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 ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and ServiceNow go up and down completely randomly.

Pair Corralation between AKITA Drilling and ServiceNow

Assuming the 90 days horizon AKITA Drilling is expected to under-perform the ServiceNow. But the pink sheet apears to be less risky and, when comparing its historical volatility, AKITA Drilling is 1.07 times less risky than ServiceNow. The pink sheet trades about -0.06 of its potential returns per unit of risk. The ServiceNow is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  89,064  in ServiceNow on October 3, 2024 and sell it today you would earn a total of  17,706  from holding ServiceNow or generate 19.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

AKITA Drilling  vs.  ServiceNow

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.

ServiceNow

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AKITA Drilling and ServiceNow

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

The idea behind AKITA Drilling and ServiceNow 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.