Correlation Between Adams Natural and Knights Of
Can any of the company-specific risk be diversified away by investing in both Adams Natural and Knights Of 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 Knights Of 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 Knights Of Umbus, you can compare the effects of market volatilities on Adams Natural and Knights Of 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 Knights Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Natural and Knights Of.
Diversification Opportunities for Adams Natural and Knights Of
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Adams and Knights is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and Knights Of Umbus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knights Of Umbus 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 Knights Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knights Of Umbus has no effect on the direction of Adams Natural i.e., Adams Natural and Knights Of go up and down completely randomly.
Pair Corralation between Adams Natural and Knights Of
Considering the 90-day investment horizon Adams Natural Resources is expected to generate 1.32 times more return on investment than Knights Of. However, Adams Natural is 1.32 times more volatile than Knights Of Umbus. It trades about 0.16 of its potential returns per unit of risk. Knights Of Umbus is currently generating about 0.2 per unit of risk. If you would invest 2,176 in Adams Natural Resources on September 3, 2024 and sell it today you would earn a total of 192.00 from holding Adams Natural Resources or generate 8.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adams Natural Resources vs. Knights Of Umbus
Performance |
| Timeline |
| Adams Natural Resources |
| Knights Of Umbus |
Adams Natural and Knights Of Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adams Natural and Knights Of
The main advantage of trading using opposite Adams Natural and Knights Of positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Natural position performs unexpectedly, Knights Of 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 Knights Of will offset losses from the drop in Knights Of'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 |
| Knights Of vs. Fidelity Advisor Energy | Knights Of vs. Tortoise Energy Independence | Knights Of vs. Adams Natural Resources | Knights Of vs. Jennison Natural Resources |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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