Correlation Between Central Securities and Adams Natural
Can any of the company-specific risk be diversified away by investing in both Central Securities and Adams Natural 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 Central Securities and Adams Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Securities and Adams Natural Resources, you can compare the effects of market volatilities on Central Securities and Adams Natural 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 Central Securities with a short position of Adams Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Securities and Adams Natural.
Diversification Opportunities for Central Securities and Adams Natural
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Central and Adams is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Central Securities and Adams Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Natural Resources and Central Securities 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 Central Securities are associated (or correlated) with Adams Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Natural Resources has no effect on the direction of Central Securities i.e., Central Securities and Adams Natural go up and down completely randomly.
Pair Corralation between Central Securities and Adams Natural
Considering the 90-day investment horizon Central Securities is expected to generate 1.14 times less return on investment than Adams Natural. But when comparing it to its historical volatility, Central Securities is 1.65 times less risky than Adams Natural. It trades about 0.31 of its potential returns per unit of risk. Adams Natural Resources is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,124 in Adams Natural Resources on November 1, 2024 and sell it today you would earn a total of 101.00 from holding Adams Natural Resources or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Central Securities vs. Adams Natural Resources
Performance |
| Timeline |
| Central Securities |
| Adams Natural Resources |
Central Securities and Adams Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Securities and Adams Natural
The main advantage of trading using opposite Central Securities and Adams Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Securities position performs unexpectedly, Adams Natural 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 Adams Natural will offset losses from the drop in Adams Natural's long position.| Central Securities vs. Munivest Fund | Central Securities vs. DWS Municipal Income | Central Securities vs. Blackrock Muniyield Quality | Central Securities vs. Blackrock Muniyield Quality |
| Adams Natural vs. Liberty All Star | Adams Natural vs. Tri Continental Closed | Adams Natural vs. Royce Value Closed | Adams Natural vs. Central Securities |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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