Correlation Between AKITA Drilling and CVS Health

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

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

Diversification Opportunities for AKITA Drilling and CVS Health

-0.35

Correlation Coefficient

AKITA Drilling  CVS Health

Very good diversification

The 3 months correlation between AKITA and CVS is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding AKITA Drilling and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of AKITA Drilling i.e., AKITA Drilling and CVS Health go up and down completely randomly.

Pair Corralation between AKITA Drilling and CVS Health

Assuming the 90 days horizon AKITA Drilling is expected to generate 1.27 times more return on investment than CVS Health. However, AKITA Drilling is 1.27 times more volatile than CVS Health Corp. It trades about 0.05 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.01 per unit of risk. If you would invest  91.00  in AKITA Drilling on March 8, 2025 and sell it today you would earn a total of  62.00  from holding AKITA Drilling or generate 68.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

AKITA Drilling  vs.  CVS Health Corp

AKITA Drilling

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 20 (%) 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.

CVS Health Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CVS Health is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AKITA Drilling and CVS Health

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

The idea behind AKITA Drilling and CVS Health 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.