Correlation Between ADF and Mayville Engineering
Can any of the company-specific risk be diversified away by investing in both ADF and Mayville Engineering 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 ADF and Mayville Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADF Group and Mayville Engineering Co, you can compare the effects of market volatilities on ADF and Mayville Engineering 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 ADF with a short position of Mayville Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF and Mayville Engineering.
Diversification Opportunities for ADF and Mayville Engineering
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ADF and Mayville is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and Mayville Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mayville Engineering and ADF 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 ADF Group are associated (or correlated) with Mayville Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mayville Engineering has no effect on the direction of ADF i.e., ADF and Mayville Engineering go up and down completely randomly.
Pair Corralation between ADF and Mayville Engineering
Assuming the 90 days horizon ADF Group is expected to generate 1.49 times more return on investment than Mayville Engineering. However, ADF is 1.49 times more volatile than Mayville Engineering Co. It trades about 0.05 of its potential returns per unit of risk. Mayville Engineering Co is currently generating about 0.04 per unit of risk. If you would invest 506.00 in ADF Group on September 12, 2024 and sell it today you would earn a total of 161.00 from holding ADF Group or generate 31.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.98% |
| Values | Daily Returns |
ADF Group vs. Mayville Engineering Co
Performance |
| Timeline |
| ADF Group |
| Mayville Engineering |
ADF and Mayville Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ADF and Mayville Engineering
The main advantage of trading using opposite ADF and Mayville Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADF position performs unexpectedly, Mayville Engineering 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 Mayville Engineering will offset losses from the drop in Mayville Engineering's long position.The idea behind ADF Group and Mayville Engineering Co 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.| Mayville Engineering vs. Insteel Industries | Mayville Engineering vs. Gulf Island Fabrication | Mayville Engineering vs. ESAB Corp | Mayville Engineering vs. Northwest Pipe |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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