Correlation Between Southern Energy and AKITA Drilling

Can any of the company-specific risk be diversified away by investing in both Southern 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 Southern 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 Southern Energy Corp and AKITA Drilling, you can compare the effects of market volatilities on Southern 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 Southern Energy with a short position of AKITA Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Energy and AKITA Drilling.

Diversification Opportunities for Southern Energy and AKITA Drilling

-0.65

Correlation Coefficient

Southern Energy  AKITA Drilling

Excellent diversification

The 3 months correlation between Southern and AKITA is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Southern Energy Corp and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and Southern 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 Southern Energy Corp 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 Southern Energy i.e., Southern Energy and AKITA Drilling go up and down completely randomly.

Pair Corralation between Southern Energy and AKITA Drilling

Assuming the 90 days horizon Southern Energy Corp is expected to under-perform the AKITA Drilling. In addition to that, Southern Energy is 2.73 times more volatile than AKITA Drilling. It trades about -0.06 of its total potential returns per unit of risk. AKITA Drilling is currently generating about 0.17 per unit of volatility. If you would invest  130.00  in AKITA Drilling on September 12, 2024 and sell it today you would earn a total of  35.00  from holding AKITA Drilling or generate 26.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Southern Energy Corp  vs.  AKITA Drilling

Southern Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

AKITA Drilling

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, AKITA Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Energy and AKITA Drilling

The main advantage of trading using opposite Southern Energy and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern 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 Southern Energy Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.