Correlation Between AKITA Drilling and Valeura Energy

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

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

Diversification Opportunities for AKITA Drilling and Valeura Energy

-0.15

Correlation Coefficient

AKITA Drilling  Valeura Energy

Good diversification

The 3 months correlation between AKITA and Valeura is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy 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 Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and Valeura Energy go up and down completely randomly.

Pair Corralation between AKITA Drilling and Valeura Energy

Assuming the 90 days horizon AKITA Drilling is expected to generate 80.41 times less return on investment than Valeura Energy. But when comparing it to its historical volatility, AKITA Drilling is 1.55 times less risky than Valeura Energy. It trades about 0.0 of its potential returns per unit of risk. Valeura Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  191.00  in Valeura Energy on October 15, 2024 and sell it today you would earn a total of  362.00  from holding Valeura Energy or generate 189.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

AKITA Drilling  vs.  Valeura Energy

AKITA Drilling

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AKITA Drilling may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Valeura Energy

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AKITA Drilling and Valeura Energy

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

The idea behind AKITA Drilling and Valeura Energy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.