Correlation Between AKITA Drilling and Encompass Holdings

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

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

Diversification Opportunities for AKITA Drilling and Encompass Holdings

0.0

Correlation Coefficient

AKITA Drilling  Encompass Holdings

Pay attention - limited upside

The 3 months correlation between AKITA and Encompass is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and Encompass Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encompass Holdings 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 Encompass Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encompass Holdings has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and Encompass Holdings go up and down completely randomly.

Pair Corralation between AKITA Drilling and Encompass Holdings

If you would invest  107.00  in AKITA Drilling on September 26, 2024 and sell it today you would earn a total of  4.00  from holding AKITA Drilling or generate 3.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

AKITA Drilling  vs.  Encompass Holdings

AKITA Drilling

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 3 (%) 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.

Encompass Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encompass Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Encompass Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with AKITA Drilling and Encompass Holdings

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

The idea behind AKITA Drilling and Encompass Holdings 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.