Correlation Between Bowhead Specialty and AKITA Drilling

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

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

Diversification Opportunities for Bowhead Specialty and AKITA Drilling

-0.05

Correlation Coefficient

Bowhead Specialty  AKITA Drilling

Good diversification

The 3 months correlation between Bowhead and AKITA is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bowhead Specialty Holdings and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and Bowhead Specialty 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 Bowhead Specialty Holdings are associated (or correlated) with AKITA Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKITA Drilling has no effect on the direction of Bowhead Specialty i.e., Bowhead Specialty and AKITA Drilling go up and down completely randomly.

Pair Corralation between Bowhead Specialty and AKITA Drilling

Considering the 90-day investment horizon Bowhead Specialty Holdings is expected to generate 0.88 times more return on investment than AKITA Drilling. However, Bowhead Specialty Holdings is 1.14 times less risky than AKITA Drilling. It trades about 0.14 of its potential returns per unit of risk. AKITA Drilling is currently generating about 0.05 per unit of risk. If you would invest  2,510  in Bowhead Specialty Holdings on September 29, 2024 and sell it today you would earn a total of  1,004  from holding Bowhead Specialty Holdings or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Bowhead Specialty Holdings  vs.  AKITA Drilling

Bowhead Specialty

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Bowhead Specialty showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Bowhead Specialty and AKITA Drilling

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

The idea behind Bowhead Specialty Holdings and AKITA Drilling 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.