Correlation Between ARDAGH METAL and Advanced Drainage

Can any of the company-specific risk be diversified away by investing in both ARDAGH METAL and Advanced Drainage 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 ARDAGH METAL and Advanced Drainage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ARDAGH METAL PACDL 0001 and Advanced Drainage Systems, you can compare the effects of market volatilities on ARDAGH METAL and Advanced Drainage 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 ARDAGH METAL with a short position of Advanced Drainage. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARDAGH METAL and Advanced Drainage.

Diversification Opportunities for ARDAGH METAL and Advanced Drainage

0.58

Correlation Coefficient

ARDAGH METAL  Advanced Drainage

Very weak diversification

The 3 months correlation between ARDAGH and Advanced is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding ARDAGH METAL PACDL 0001 and Advanced Drainage Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Drainage Systems and ARDAGH METAL 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 ARDAGH METAL PACDL 0001 are associated (or correlated) with Advanced Drainage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Drainage Systems has no effect on the direction of ARDAGH METAL i.e., ARDAGH METAL and Advanced Drainage go up and down completely randomly.

Pair Corralation between ARDAGH METAL and Advanced Drainage

Assuming the 90 days horizon ARDAGH METAL PACDL 0001 is expected to under-perform the Advanced Drainage. In addition to that, ARDAGH METAL is 1.45 times more volatile than Advanced Drainage Systems. It trades about -0.34 of its total potential returns per unit of risk. Advanced Drainage Systems is currently generating about -0.41 per unit of volatility. If you would invest  12,350  in Advanced Drainage Systems on October 8, 2024 and sell it today you would lose (1,180) from holding Advanced Drainage Systems or give up 9.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ARDAGH METAL PACDL 0001  vs.  Advanced Drainage Systems

ARDAGH METAL PACDL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARDAGH METAL PACDL 0001 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Advanced Drainage Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Drainage Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ARDAGH METAL and Advanced Drainage

The main advantage of trading using opposite ARDAGH METAL and Advanced Drainage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARDAGH METAL position performs unexpectedly, Advanced Drainage 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 Advanced Drainage will offset losses from the drop in Advanced Drainage's long position.

The idea behind ARDAGH METAL PACDL 0001 and Advanced Drainage Systems 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.