Correlation Between AKITA Drilling and Costco Wholesale

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

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

Diversification Opportunities for AKITA Drilling and Costco Wholesale

0.33

Correlation Coefficient

AKITA Drilling  Costco Wholesale

Weak diversification

The 3 months correlation between AKITA and Costco is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp and AKITA 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 AKITA Drilling are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale Corp has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and Costco Wholesale go up and down completely randomly.

Pair Corralation between AKITA Drilling and Costco Wholesale

Assuming the 90 days trading horizon AKITA Drilling is expected to generate 2.31 times more return on investment than Costco Wholesale. However, AKITA Drilling is 2.31 times more volatile than Costco Wholesale Corp. It trades about 0.13 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.13 per unit of risk. If you would invest  136.00  in AKITA Drilling on September 16, 2024 and sell it today you would earn a total of  27.00  from holding AKITA Drilling or generate 19.85% return on investment over 90 days.

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

AKITA Drilling  vs.  Costco Wholesale Corp

AKITA Drilling

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, AKITA Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Costco Wholesale Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AKITA Drilling and Costco Wholesale

The main advantage of trading using opposite AKITA Drilling and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AKITA Drilling position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.

The idea behind AKITA Drilling and Costco Wholesale Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.