Correlation Between Cobalt Power and AKITA Drilling

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

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

Diversification Opportunities for Cobalt Power and AKITA Drilling

-0.6

Correlation Coefficient

Cobalt Power  AKITA Drilling

Excellent diversification

The 3 months correlation between Cobalt and AKITA is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cobalt Power Group and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and Cobalt Power 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 Cobalt Power Group 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 Cobalt Power i.e., Cobalt Power and AKITA Drilling go up and down completely randomly.

Pair Corralation between Cobalt Power and AKITA Drilling

Assuming the 90 days horizon Cobalt Power Group is expected to generate 10.18 times more return on investment than AKITA Drilling. However, Cobalt Power is 10.18 times more volatile than AKITA Drilling. It trades about 0.06 of its potential returns per unit of risk. AKITA Drilling is currently generating about 0.03 per unit of risk. If you would invest  10.00  in Cobalt Power Group on October 9, 2024 and sell it today you would lose (7.50) from holding Cobalt Power Group or give up 75.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.46%
Values	Daily Returns

Cobalt Power Group  vs.  AKITA Drilling

Cobalt Power Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cobalt Power Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

AKITA Drilling

Risk-Adjusted Performance

5 of 100

Modest

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 weak basic indicators, AKITA Drilling may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cobalt Power and AKITA Drilling

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