Correlation Between Commercial Vehicle and ADT
Can any of the company-specific risk be diversified away by investing in both Commercial Vehicle and ADT 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 Commercial Vehicle and ADT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commercial Vehicle Group and ADT Inc, you can compare the effects of market volatilities on Commercial Vehicle and ADT 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 Commercial Vehicle with a short position of ADT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Vehicle and ADT.
Diversification Opportunities for Commercial Vehicle and ADT
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Commercial and ADT is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Vehicle Group and ADT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADT Inc and Commercial Vehicle 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 Commercial Vehicle Group are associated (or correlated) with ADT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADT Inc has no effect on the direction of Commercial Vehicle i.e., Commercial Vehicle and ADT go up and down completely randomly.
Pair Corralation between Commercial Vehicle and ADT
Assuming the 90 days trading horizon Commercial Vehicle Group is expected to under-perform the ADT. In addition to that, Commercial Vehicle is 1.38 times more volatile than ADT Inc. It trades about -0.11 of its total potential returns per unit of risk. ADT Inc is currently generating about 0.05 per unit of volatility. If you would invest 561.00 in ADT Inc on October 18, 2024 and sell it today you would earn a total of 139.00 from holding ADT Inc or generate 24.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Commercial Vehicle Group vs. ADT Inc
Performance |
| Timeline |
| Commercial Vehicle |
| ADT Inc |
Commercial Vehicle and ADT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commercial Vehicle and ADT
The main advantage of trading using opposite Commercial Vehicle and ADT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Vehicle position performs unexpectedly, ADT 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 ADT will offset losses from the drop in ADT's long position.| Commercial Vehicle vs. COLUMBIA SPORTSWEAR | Commercial Vehicle vs. Fukuyama Transporting Co | Commercial Vehicle vs. JD SPORTS FASH | Commercial Vehicle vs. Gaztransport Technigaz SA |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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