Correlation Between Antero Midstream and AKITA Drilling

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

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

Diversification Opportunities for Antero Midstream and AKITA Drilling

0.29

Correlation Coefficient

Antero Midstream  AKITA Drilling

Modest diversification

The 3 months correlation between Antero and AKITA is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling and Antero Midstream 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 Antero Midstream Partners 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 Antero Midstream i.e., Antero Midstream and AKITA Drilling go up and down completely randomly.

Pair Corralation between Antero Midstream and AKITA Drilling

Allowing for the 90-day total investment horizon Antero Midstream Partners is expected to generate 0.43 times more return on investment than AKITA Drilling. However, Antero Midstream Partners is 2.33 times less risky than AKITA Drilling. It trades about 0.09 of its potential returns per unit of risk. AKITA Drilling is currently generating about 0.0 per unit of risk. If you would invest  1,000.00  in Antero Midstream Partners on February 5, 2024 and sell it today you would earn a total of  415.00  from holding Antero Midstream Partners or generate 41.5% return on investment over 90 days.

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

Antero Midstream Partners  vs.  AKITA Drilling

Antero Midstream Partners

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Antero Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

AKITA Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AKITA Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AKITA Drilling is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Antero Midstream and AKITA Drilling

The main advantage of trading using opposite Antero Midstream and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Antero Midstream 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 Antero Midstream Partners 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.