Correlation Between ADX and New Tech
Can any of the company-specific risk be diversified away by investing in both ADX and New Tech 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 ADX and New Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADX and New Tech Venture, you can compare the effects of market volatilities on ADX and New Tech 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 ADX with a short position of New Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADX and New Tech.
Diversification Opportunities for ADX and New Tech
Very good diversification
The 3 months correlation between ADX and New is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding ADX and New Tech Venture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Tech Venture and ADX 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 ADX are associated (or correlated) with New Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Tech Venture has no effect on the direction of ADX i.e., ADX and New Tech go up and down completely randomly.
Pair Corralation between ADX and New Tech
Assuming the 90 days trading horizon ADX is expected to under-perform the New Tech. In addition to that, ADX is 2.48 times more volatile than New Tech Venture. It trades about -0.01 of its total potential returns per unit of risk. New Tech Venture is currently generating about 0.28 per unit of volatility. If you would invest 11.00 in New Tech Venture on October 23, 2024 and sell it today you would earn a total of 1.00 from holding New Tech Venture or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 86.67% |
| Values | Daily Returns |
ADX vs. New Tech Venture
Performance |
| Timeline |
| ADX |
| New Tech Venture |
ADX and New Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ADX and New Tech
The main advantage of trading using opposite ADX and New Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADX position performs unexpectedly, New Tech 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 New Tech will offset losses from the drop in New Tech's long position.The idea behind ADX and New Tech Venture 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.| New Tech vs. Mercator Medical SA | New Tech vs. PZ Cormay SA | New Tech vs. Marie Brizard Wine | New Tech vs. Quantum Software SA |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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