Correlation Between Element Fleet and AKITA Drilling

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

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

Diversification Opportunities for Element Fleet and AKITA Drilling

0.04

Correlation Coefficient

Element Fleet  AKITA Drilling

Significant diversification

The 3 months correlation between Element and AKITA is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Element Fleet Management and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and Element Fleet 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 Element Fleet Management 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 Element Fleet i.e., Element Fleet and AKITA Drilling go up and down completely randomly.

Pair Corralation between Element Fleet and AKITA Drilling

Assuming the 90 days trading horizon Element Fleet Management is expected to under-perform the AKITA Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Element Fleet Management is 2.47 times less risky than AKITA Drilling. The stock trades about -0.01 of its potential returns per unit of risk. The AKITA Drilling is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  160.00  in AKITA Drilling on December 31, 2024 and sell it today you would earn a total of  26.00  from holding AKITA Drilling or generate 16.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Element Fleet Management  vs.  AKITA Drilling

Element Fleet Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Fleet Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Element Fleet is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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. In spite of comparatively weak basic indicators, AKITA Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Element Fleet and AKITA Drilling

The main advantage of trading using opposite Element Fleet and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Fleet 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 Element Fleet Management 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.