Correlation Between Rocky Mountain and AKITA Drilling

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

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

Diversification Opportunities for Rocky Mountain and AKITA Drilling

-0.08

Correlation Coefficient

Rocky Mountain  AKITA Drilling

Good diversification

The 3 months correlation between Rocky and AKITA is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Chocolate and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and Rocky Mountain 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 Rocky Mountain Chocolate 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 Rocky Mountain i.e., Rocky Mountain and AKITA Drilling go up and down completely randomly.

Pair Corralation between Rocky Mountain and AKITA Drilling

Given the investment horizon of 90 days Rocky Mountain Chocolate is expected to under-perform the AKITA Drilling. In addition to that, Rocky Mountain is 4.3 times more volatile than AKITA Drilling. It trades about -0.12 of its total potential returns per unit of risk. AKITA Drilling is currently generating about 0.2 per unit of volatility. If you would invest  110.00  in AKITA Drilling on October 26, 2024 and sell it today you would earn a total of  6.00  from holding AKITA Drilling or generate 5.45% return on investment over 90 days.

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

Rocky Mountain Chocolate  vs.  AKITA Drilling

Rocky Mountain Chocolate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Chocolate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AKITA Drilling

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AKITA Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rocky Mountain and AKITA Drilling

The main advantage of trading using opposite Rocky Mountain and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Mountain 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 Rocky Mountain Chocolate 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.