Correlation Between Accord Financial and ADF
Can any of the company-specific risk be diversified away by investing in both Accord Financial and ADF 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 Accord Financial and ADF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Accord Financial Corp and ADF Group, you can compare the effects of market volatilities on Accord Financial and ADF 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 Accord Financial with a short position of ADF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Accord Financial and ADF.
Diversification Opportunities for Accord Financial and ADF
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Accord and ADF is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Accord Financial Corp and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group and Accord Financial 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 Accord Financial Corp are associated (or correlated) with ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Accord Financial i.e., Accord Financial and ADF go up and down completely randomly.
Pair Corralation between Accord Financial and ADF
Assuming the 90 days trading horizon Accord Financial Corp is expected to under-perform the ADF. But the stock apears to be less risky and, when comparing its historical volatility, Accord Financial Corp is 3.82 times less risky than ADF. The stock trades about -0.19 of its potential returns per unit of risk. The ADF Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 974.00 in ADF Group on September 4, 2024 and sell it today you would lose (4.00) from holding ADF Group or give up 0.41% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Accord Financial Corp vs. ADF Group
Performance |
Timeline |
Accord Financial Corp |
ADF Group |
Accord Financial and ADF Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Accord Financial and ADF
The main advantage of trading using opposite Accord Financial and ADF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Accord Financial position performs unexpectedly, ADF 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 ADF will offset losses from the drop in ADF's long position.Accord Financial vs. Algoma Central | Accord Financial vs. Chesswood Group Limited | Accord Financial vs. Clairvest Group | Accord Financial vs. Clarke Inc |
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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