Correlation Between ADF and Goodfellow
Can any of the company-specific risk be diversified away by investing in both ADF and Goodfellow 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 ADF and Goodfellow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADF Group and Goodfellow, you can compare the effects of market volatilities on ADF and Goodfellow 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 ADF with a short position of Goodfellow. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF and Goodfellow.
Diversification Opportunities for ADF and Goodfellow
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between ADF and Goodfellow is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and Goodfellow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodfellow and ADF 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 ADF Group are associated (or correlated) with Goodfellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodfellow has no effect on the direction of ADF i.e., ADF and Goodfellow go up and down completely randomly.
Pair Corralation between ADF and Goodfellow
Assuming the 90 days trading horizon ADF Group is expected to under-perform the Goodfellow. In addition to that, ADF is 2.5 times more volatile than Goodfellow. It trades about -0.1 of its total potential returns per unit of risk. Goodfellow is currently generating about 0.0 per unit of volatility. If you would invest 1,425 in Goodfellow on September 2, 2024 and sell it today you would lose (26.00) from holding Goodfellow or give up 1.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ADF Group vs. Goodfellow
Performance |
| Timeline |
| ADF Group |
| Goodfellow |
ADF and Goodfellow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ADF and Goodfellow
The main advantage of trading using opposite ADF and Goodfellow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADF position performs unexpectedly, Goodfellow 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 Goodfellow will offset losses from the drop in Goodfellow's long position.The idea behind ADF Group and Goodfellow 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.| Goodfellow vs. Interfor Corp | Goodfellow vs. Canfor | Goodfellow vs. Stella Jones | Goodfellow vs. Western Forest Products |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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