Correlation Between ADF and Postmedia Network
Can any of the company-specific risk be diversified away by investing in both ADF and Postmedia Network 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 Postmedia Network into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADF Group and Postmedia Network Canada, you can compare the effects of market volatilities on ADF and Postmedia Network 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 Postmedia Network. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF and Postmedia Network.
Diversification Opportunities for ADF and Postmedia Network
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ADF and Postmedia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and Postmedia Network Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postmedia Network Canada 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 Postmedia Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postmedia Network Canada has no effect on the direction of ADF i.e., ADF and Postmedia Network go up and down completely randomly.
Pair Corralation between ADF and Postmedia Network
Assuming the 90 days trading horizon ADF Group is expected to under-perform the Postmedia Network. In addition to that, ADF is 2.51 times more volatile than Postmedia Network Canada. It trades about -0.24 of its total potential returns per unit of risk. Postmedia Network Canada is currently generating about -0.29 per unit of volatility. If you would invest 132.00 in Postmedia Network Canada on August 29, 2024 and sell it today you would lose (10.00) from holding Postmedia Network Canada or give up 7.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
ADF Group vs. Postmedia Network Canada
Performance |
| Timeline |
| ADF Group |
| Postmedia Network Canada |
ADF and Postmedia Network Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ADF and Postmedia Network
The main advantage of trading using opposite ADF and Postmedia Network positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADF position performs unexpectedly, Postmedia Network 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 Postmedia Network will offset losses from the drop in Postmedia Network's long position.The idea behind ADF Group and Postmedia Network Canada 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.| Postmedia Network vs. Royal Helium | Postmedia Network vs. Excelsior Mining Corp | Postmedia Network vs. Vista Gold | Postmedia Network vs. TeraGo Inc |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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