Correlation Between ADF and Goeasy
Can any of the company-specific risk be diversified away by investing in both ADF and Goeasy 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 Goeasy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADF Group and goeasy, you can compare the effects of market volatilities on ADF and Goeasy 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 Goeasy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF and Goeasy.
Diversification Opportunities for ADF and Goeasy
Weak diversification
The 3 months correlation between ADF and Goeasy is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and goeasy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on goeasy 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 Goeasy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of goeasy has no effect on the direction of ADF i.e., ADF and Goeasy go up and down completely randomly.
Pair Corralation between ADF and Goeasy
Assuming the 90 days trading horizon ADF Group is expected to under-perform the Goeasy. In addition to that, ADF is 2.12 times more volatile than goeasy. It trades about -0.06 of its total potential returns per unit of risk. goeasy is currently generating about -0.09 per unit of volatility. If you would invest 19,923 in goeasy on September 28, 2024 and sell it today you would lose (3,346) from holding goeasy or give up 16.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ADF Group vs. goeasy
Performance |
| Timeline |
| ADF Group |
| goeasy |
ADF and Goeasy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ADF and Goeasy
The main advantage of trading using opposite ADF and Goeasy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADF position performs unexpectedly, Goeasy 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 Goeasy will offset losses from the drop in Goeasy's long position.| ADF vs. IBC Advanced Alloys | ADF vs. Ucore Rare Metals | ADF vs. Commerce Resources Corp | ADF vs. Focus Graphite |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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