Correlation Between AKITA Drilling and CONSOLIDATED

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

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

Diversification Opportunities for AKITA Drilling and CONSOLIDATED

0.55

Correlation Coefficient

AKITA Drilling  CONSOLIDATED

Very weak diversification

The 3 months correlation between AKITA and CONSOLIDATED is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and CONSOLIDATED EDISON N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOLIDATED EDISON 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 CONSOLIDATED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSOLIDATED EDISON has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and CONSOLIDATED go up and down completely randomly.

Pair Corralation between AKITA Drilling and CONSOLIDATED

Assuming the 90 days horizon AKITA Drilling is expected to under-perform the CONSOLIDATED. In addition to that, AKITA Drilling is 1.33 times more volatile than CONSOLIDATED EDISON N. It trades about -0.12 of its total potential returns per unit of risk. CONSOLIDATED EDISON N is currently generating about 0.1 per unit of volatility. If you would invest  9,687  in CONSOLIDATED EDISON N on September 18, 2024 and sell it today you would earn a total of  75.00  from holding CONSOLIDATED EDISON N or generate 0.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	40.91%
Values	Daily Returns

AKITA Drilling  vs.  CONSOLIDATED EDISON N

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.

CONSOLIDATED EDISON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSOLIDATED EDISON N has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSOLIDATED EDISON N investors.

Pair Trading with AKITA Drilling and CONSOLIDATED

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

The idea behind AKITA Drilling and CONSOLIDATED EDISON N 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.