Correlation Between WEC Energy and AKITA Drilling

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

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

Diversification Opportunities for WEC Energy and AKITA Drilling

0.26

Correlation Coefficient

WEC Energy  AKITA Drilling

Modest diversification

The 3 months correlation between WEC and AKITA is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and WEC Energy 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 WEC Energy 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 WEC Energy i.e., WEC Energy and AKITA Drilling go up and down completely randomly.

Pair Corralation between WEC Energy and AKITA Drilling

Considering the 90-day investment horizon WEC Energy Group is expected to under-perform the AKITA Drilling. But the stock apears to be less risky and, when comparing its historical volatility, WEC Energy Group is 1.48 times less risky than AKITA Drilling. The stock trades about -0.08 of its potential returns per unit of risk. The AKITA Drilling is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  116.00  in AKITA Drilling on September 24, 2024 and sell it today you would lose (1.00) from holding AKITA Drilling or give up 0.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

WEC Energy Group  vs.  AKITA Drilling

WEC Energy Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WEC Energy Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, WEC Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

AKITA Drilling

Risk-Adjusted Performance

1 of 100

Weak

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 WEC Energy and AKITA Drilling

The main advantage of trading using opposite WEC Energy and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy 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 WEC Energy 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.