Correlation Between Aclara Resources and ADF
Can any of the company-specific risk be diversified away by investing in both Aclara Resources and ADF 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 Aclara Resources and ADF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aclara Resources and ADF Group, you can compare the effects of market volatilities on Aclara Resources and ADF 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 Aclara Resources with a short position of ADF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aclara Resources and ADF.
Diversification Opportunities for Aclara Resources and ADF
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aclara and ADF is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Aclara Resources and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group and Aclara 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 Aclara Resources are associated (or correlated) with ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Aclara Resources i.e., Aclara Resources and ADF go up and down completely randomly.
Pair Corralation between Aclara Resources and ADF
Assuming the 90 days trading horizon Aclara Resources is expected to generate 1.15 times more return on investment than ADF. However, Aclara Resources is 1.15 times more volatile than ADF Group. It trades about 0.03 of its potential returns per unit of risk. ADF Group is currently generating about 0.01 per unit of risk. If you would invest 41.00 in Aclara Resources on August 27, 2024 and sell it today you would earn a total of 2.00 from holding Aclara Resources or generate 4.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aclara Resources vs. ADF Group
Performance |
| Timeline |
| Aclara Resources |
| ADF Group |
Aclara Resources and ADF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aclara Resources and ADF
The main advantage of trading using opposite Aclara Resources and ADF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aclara Resources position performs unexpectedly, ADF 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 ADF will offset losses from the drop in ADF's long position.The idea behind Aclara Resources and ADF Group 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.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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