Correlation Between Adams Resources and Small Cap
Can any of the company-specific risk be diversified away by investing in both Adams Resources and Small Cap 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 Adams Resources and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adams Resources Energy and Small Cap Premium, you can compare the effects of market volatilities on Adams Resources and Small Cap 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 Adams Resources with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Resources and Small Cap.
Diversification Opportunities for Adams Resources and Small Cap
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adams and Small is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Adams Resources Energy and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium and Adams Resources 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 Adams Resources Energy are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of Adams Resources i.e., Adams Resources and Small Cap go up and down completely randomly.
Pair Corralation between Adams Resources and Small Cap
Allowing for the 90-day total investment horizon Adams Resources Energy is expected to generate 12.12 times more return on investment than Small Cap. However, Adams Resources is 12.12 times more volatile than Small Cap Premium. It trades about 0.22 of its potential returns per unit of risk. Small Cap Premium is currently generating about 0.04 per unit of risk. If you would invest 2,695 in Adams Resources Energy on August 29, 2024 and sell it today you would earn a total of 1,026 from holding Adams Resources Energy or generate 38.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adams Resources Energy vs. Small Cap Premium
Performance |
| Timeline |
| Adams Resources Energy |
| Small Cap Premium |
Adams Resources and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adams Resources and Small Cap
The main advantage of trading using opposite Adams Resources and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Resources position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Adams Resources vs. PrimeEnergy | Adams Resources vs. Barnwell Industries | Adams Resources vs. Acme United | Adams Resources vs. CKX Lands |
| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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