Correlation Between ADF and Worthington Industries
Can any of the company-specific risk be diversified away by investing in both ADF and Worthington Industries 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 Worthington Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADF Group and Worthington Industries, you can compare the effects of market volatilities on ADF and Worthington Industries 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 Worthington Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF and Worthington Industries.
Diversification Opportunities for ADF and Worthington Industries
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ADF and Worthington is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and Worthington Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Industries 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 Worthington Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Industries has no effect on the direction of ADF i.e., ADF and Worthington Industries go up and down completely randomly.
Pair Corralation between ADF and Worthington Industries
Assuming the 90 days horizon ADF Group is expected to under-perform the Worthington Industries. In addition to that, ADF is 1.46 times more volatile than Worthington Industries. It trades about -0.05 of its total potential returns per unit of risk. Worthington Industries is currently generating about -0.04 per unit of volatility. If you would invest 4,404 in Worthington Industries on September 12, 2024 and sell it today you would lose (318.00) from holding Worthington Industries or give up 7.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ADF Group vs. Worthington Industries
Performance |
| Timeline |
| ADF Group |
| Worthington Industries |
ADF and Worthington Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ADF and Worthington Industries
The main advantage of trading using opposite ADF and Worthington Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADF position performs unexpectedly, Worthington Industries 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 Worthington Industries will offset losses from the drop in Worthington Industries' long position.The idea behind ADF Group and Worthington Industries 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.| Worthington Industries vs. Allegheny Technologies Incorporated | Worthington Industries vs. ESAB Corp | Worthington Industries vs. Insteel Industries | Worthington Industries vs. Mayville Engineering Co |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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