Correlation Between Adams Natural and Applied Finance
Can any of the company-specific risk be diversified away by investing in both Adams Natural and Applied Finance 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 Adams Natural and Applied Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adams Natural Resources and Applied Finance Explorer, you can compare the effects of market volatilities on Adams Natural and Applied Finance 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 Adams Natural with a short position of Applied Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Natural and Applied Finance.
Diversification Opportunities for Adams Natural and Applied Finance
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Adams and Applied is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and Applied Finance Explorer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Explorer and Adams Natural 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 Adams Natural Resources are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Explorer has no effect on the direction of Adams Natural i.e., Adams Natural and Applied Finance go up and down completely randomly.
Pair Corralation between Adams Natural and Applied Finance
Considering the 90-day investment horizon Adams Natural Resources is expected to generate 0.88 times more return on investment than Applied Finance. However, Adams Natural Resources is 1.14 times less risky than Applied Finance. It trades about 0.71 of its potential returns per unit of risk. Applied Finance Explorer is currently generating about 0.13 per unit of risk. If you would invest 2,123 in Adams Natural Resources on October 20, 2024 and sell it today you would earn a total of 263.00 from holding Adams Natural Resources or generate 12.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adams Natural Resources vs. Applied Finance Explorer
Performance |
| Timeline |
| Adams Natural Resources |
| Applied Finance Explorer |
Adams Natural and Applied Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adams Natural and Applied Finance
The main advantage of trading using opposite Adams Natural and Applied Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Natural position performs unexpectedly, Applied Finance 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 Applied Finance will offset losses from the drop in Applied Finance's long position.| Adams Natural vs. Liberty All Star | Adams Natural vs. Tri Continental Closed | Adams Natural vs. Royce Value Closed | Adams Natural vs. Central Securities |
| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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