Correlation Between Adams Natural and General American
Can any of the company-specific risk be diversified away by investing in both Adams Natural and General American 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 General American 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 General American Investors, you can compare the effects of market volatilities on Adams Natural and General American 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 General American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Natural and General American.
Diversification Opportunities for Adams Natural and General American
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adams and General is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and General American Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General American Inv 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 General American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General American Inv has no effect on the direction of Adams Natural i.e., Adams Natural and General American go up and down completely randomly.
Pair Corralation between Adams Natural and General American
Considering the 90-day investment horizon Adams Natural is expected to generate 2.9 times less return on investment than General American. In addition to that, Adams Natural is 1.27 times more volatile than General American Investors. It trades about 0.04 of its total potential returns per unit of risk. General American Investors is currently generating about 0.16 per unit of volatility. If you would invest 4,247 in General American Investors on September 3, 2024 and sell it today you would earn a total of 894.00 from holding General American Investors or generate 21.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adams Natural Resources vs. General American Investors
Performance |
| Timeline |
| Adams Natural Resources |
| General American Inv |
Adams Natural and General American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adams Natural and General American
The main advantage of trading using opposite Adams Natural and General American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Natural position performs unexpectedly, General American 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 General American will offset losses from the drop in General American'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 |
| General American vs. Blackrock Muniyield | General American vs. Allianzgi Equity Convertible | General American vs. MFS Investment Grade | General American vs. Eaton Vance National |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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