Correlation Between CONSOLIDATED and AKITA Drilling

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

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

Diversification Opportunities for CONSOLIDATED and AKITA Drilling

0.55

Correlation Coefficient

CONSOLIDATED  AKITA Drilling

Very weak diversification

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

Pair Corralation between CONSOLIDATED and AKITA Drilling

Assuming the 90 days trading horizon CONSOLIDATED EDISON N is expected to generate 0.77 times more return on investment than AKITA Drilling. However, CONSOLIDATED EDISON N is 1.3 times less risky than AKITA Drilling. It trades about -0.06 of its potential returns per unit of risk. AKITA Drilling is currently generating about -0.12 per unit of risk. If you would invest  9,687  in CONSOLIDATED EDISON N on September 18, 2024 and sell it today you would lose (55.00) from holding CONSOLIDATED EDISON N or give up 0.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	42.86%
Values	Daily Returns

CONSOLIDATED EDISON N  vs.  AKITA Drilling

CONSOLIDATED EDISON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSOLIDATED EDISON N has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSOLIDATED EDISON N investors.

AKITA Drilling

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, AKITA Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CONSOLIDATED and AKITA Drilling

The main advantage of trading using opposite CONSOLIDATED and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CONSOLIDATED 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 CONSOLIDATED EDISON N 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.