Correlation Between AKITA Drilling and AmTrust Financial

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

By analyzing existing cross correlation between AKITA Drilling and AmTrust Financial Services, you can compare the effects of market volatilities on AKITA Drilling and AmTrust Financial 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 AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of AKITA Drilling and AmTrust Financial.

Diversification Opportunities for AKITA Drilling and AmTrust Financial

0.27

Correlation Coefficient

AKITA Drilling  AmTrust Financial

Modest diversification

The 3 months correlation between AKITA and AmTrust is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial 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 AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and AmTrust Financial go up and down completely randomly.

Pair Corralation between AKITA Drilling and AmTrust Financial

Assuming the 90 days horizon AKITA Drilling is expected to under-perform the AmTrust Financial. But the pink sheet apears to be less risky and, when comparing its historical volatility, AKITA Drilling is 2.08 times less risky than AmTrust Financial. The pink sheet trades about -0.05 of its potential returns per unit of risk. The AmTrust Financial Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,423  in AmTrust Financial Services on September 12, 2024 and sell it today you would earn a total of  29.00  from holding AmTrust Financial Services or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

AKITA Drilling  vs.  AmTrust Financial Services

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. Despite nearly weak basic indicators, AKITA Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

AmTrust Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, AmTrust Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AKITA Drilling and AmTrust Financial

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

The idea behind AKITA Drilling and AmTrust Financial Services 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.