Correlation Between AKITA Drilling and Simpson Manufacturing

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

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

Diversification Opportunities for AKITA Drilling and Simpson Manufacturing

0.47

Correlation Coefficient

AKITA Drilling  Simpson Manufacturing

Very weak diversification

The 3 months correlation between AKITA and Simpson is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and Simpson Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simpson Manufacturing 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 Simpson Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simpson Manufacturing has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and Simpson Manufacturing go up and down completely randomly.

Pair Corralation between AKITA Drilling and Simpson Manufacturing

Assuming the 90 days horizon AKITA Drilling is expected to generate 18.77 times less return on investment than Simpson Manufacturing. But when comparing it to its historical volatility, AKITA Drilling is 1.49 times less risky than Simpson Manufacturing. It trades about 0.01 of its potential returns per unit of risk. Simpson Manufacturing is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  17,955  in Simpson Manufacturing on September 4, 2024 and sell it today you would earn a total of  628.00  from holding Simpson Manufacturing or generate 3.5% return on investment over 90 days.

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

AKITA Drilling  vs.  Simpson Manufacturing

AKITA Drilling

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AKITA Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Simpson Manufacturing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simpson Manufacturing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Simpson Manufacturing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AKITA Drilling and Simpson Manufacturing

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

The idea behind AKITA Drilling and Simpson Manufacturing 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.