Correlation Between AKRO and DKargo

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

By analyzing existing cross correlation between AKRO and dKargo, you can compare the effects of market volatilities on AKRO and DKargo 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 AKRO with a short position of DKargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of AKRO and DKargo.

Diversification Opportunities for AKRO and DKargo

0.7

Correlation Coefficient

AKRO  DKargo

Poor diversification

The 3 months correlation between AKRO and DKargo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding AKRO and dKargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on dKargo and AKRO 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 AKRO are associated (or correlated) with DKargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of dKargo has no effect on the direction of AKRO i.e., AKRO and DKargo go up and down completely randomly.

Pair Corralation between AKRO and DKargo

Assuming the 90 days trading horizon AKRO is expected to generate 3.01 times more return on investment than DKargo. However, AKRO is 3.01 times more volatile than dKargo. It trades about 0.1 of its potential returns per unit of risk. dKargo is currently generating about -0.2 per unit of risk. If you would invest  0.69  in AKRO on January 24, 2024 and sell it today you would earn a total of  0.09  from holding AKRO or generate 12.74% return on investment over 90 days.

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

AKRO  vs.  dKargo

AKRO

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AKRO are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, AKRO exhibited solid returns over the last few months and may actually be approaching a breakup point.

dKargo

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in dKargo are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DKargo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AKRO and DKargo

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

The idea behind AKRO and dKargo 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.