Correlation Between Maple Leaf and AKITA Drilling

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

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

Diversification Opportunities for Maple Leaf and AKITA Drilling

0.24

Correlation Coefficient

Maple Leaf  AKITA Drilling

Modest diversification

The 3 months correlation between Maple and AKITA is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and Maple Leaf 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 Maple Leaf Foods 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 Maple Leaf i.e., Maple Leaf and AKITA Drilling go up and down completely randomly.

Pair Corralation between Maple Leaf and AKITA Drilling

Assuming the 90 days trading horizon Maple Leaf Foods is expected to under-perform the AKITA Drilling. In addition to that, Maple Leaf is 1.44 times more volatile than AKITA Drilling. It trades about -0.23 of its total potential returns per unit of risk. AKITA Drilling is currently generating about -0.04 per unit of volatility. If you would invest  167.00  in AKITA Drilling on September 21, 2024 and sell it today you would lose (2.00) from holding AKITA Drilling or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Maple Leaf Foods  vs.  AKITA Drilling

Maple Leaf Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maple Leaf Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Maple Leaf 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

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, AKITA Drilling may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Maple Leaf and AKITA Drilling

The main advantage of trading using opposite Maple Leaf and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf 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 Maple Leaf Foods 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.

Check out your portfolio center.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.