Correlation Between CompoSecure and ADS TEC
Can any of the company-specific risk be diversified away by investing in both CompoSecure and ADS TEC 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 CompoSecure and ADS TEC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CompoSecure and ADS TEC ENERGY PLC, you can compare the effects of market volatilities on CompoSecure and ADS TEC 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 CompoSecure with a short position of ADS TEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of CompoSecure and ADS TEC.
Diversification Opportunities for CompoSecure and ADS TEC
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CompoSecure and ADS is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CompoSecure and ADS TEC ENERGY PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADS TEC ENERGY and CompoSecure 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 CompoSecure are associated (or correlated) with ADS TEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADS TEC ENERGY has no effect on the direction of CompoSecure i.e., CompoSecure and ADS TEC go up and down completely randomly.
Pair Corralation between CompoSecure and ADS TEC
Assuming the 90 days horizon CompoSecure is expected to generate 1.84 times more return on investment than ADS TEC. However, CompoSecure is 1.84 times more volatile than ADS TEC ENERGY PLC. It trades about 0.11 of its potential returns per unit of risk. ADS TEC ENERGY PLC is currently generating about -0.09 per unit of risk. If you would invest 471.00 in CompoSecure on August 28, 2024 and sell it today you would earn a total of 54.00 from holding CompoSecure or generate 11.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CompoSecure vs. ADS TEC ENERGY PLC
Performance |
| Timeline |
| CompoSecure |
| ADS TEC ENERGY |
CompoSecure and ADS TEC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CompoSecure and ADS TEC
The main advantage of trading using opposite CompoSecure and ADS TEC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompoSecure position performs unexpectedly, ADS TEC 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 ADS TEC will offset losses from the drop in ADS TEC's long position.The idea behind CompoSecure and ADS TEC ENERGY PLC 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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