Correlation Between Precision Drilling and AKITA Drilling

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

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

Diversification Opportunities for Precision Drilling and AKITA Drilling

0.55

Correlation Coefficient

Precision Drilling  AKITA Drilling

Very weak diversification

The 3 months correlation between Precision and AKITA is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and Precision 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 Precision Drilling 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 Precision Drilling i.e., Precision Drilling and AKITA Drilling go up and down completely randomly.

Pair Corralation between Precision Drilling and AKITA Drilling

Assuming the 90 days horizon Precision Drilling is expected to under-perform the AKITA Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Precision Drilling is 1.01 times less risky than AKITA Drilling. The stock trades about -0.36 of its potential returns per unit of risk. The AKITA Drilling is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  169.00  in AKITA Drilling on December 5, 2024 and sell it today you would lose (19.00) from holding AKITA Drilling or give up 11.24% of portfolio value over 90 days.

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

Precision Drilling  vs.  AKITA Drilling

Precision Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Precision Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

AKITA Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days AKITA Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Precision Drilling and AKITA Drilling

The main advantage of trading using opposite Precision Drilling and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Drilling 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 Precision Drilling 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.