Correlation Between Drilling Tools and AKITA Drilling

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

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

Diversification Opportunities for Drilling Tools and AKITA Drilling

-0.21

Correlation Coefficient

Drilling Tools  AKITA Drilling

Very good diversification

The 3 months correlation between Drilling and AKITA is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Drilling Tools International and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and Drilling Tools 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 Drilling Tools International 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 Drilling Tools i.e., Drilling Tools and AKITA Drilling go up and down completely randomly.

Pair Corralation between Drilling Tools and AKITA Drilling

Considering the 90-day investment horizon Drilling Tools International is expected to under-perform the AKITA Drilling. In addition to that, Drilling Tools is 1.25 times more volatile than AKITA Drilling. It trades about -0.08 of its total potential returns per unit of risk. AKITA Drilling is currently generating about 0.11 per unit of volatility. If you would invest  111.00  in AKITA Drilling on December 29, 2024 and sell it today you would earn a total of  20.00  from holding AKITA Drilling or generate 18.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Drilling Tools International  vs.  AKITA Drilling

Drilling Tools Inter

Risk-Adjusted Performance

Very Weak

Over the last 90 days Drilling Tools International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

AKITA Drilling

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AKITA Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Drilling Tools and AKITA Drilling

The main advantage of trading using opposite Drilling Tools and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Drilling Tools 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 Drilling Tools International 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.