Correlation Between ADEIA P and Image Protect

Can any of the company-specific risk be diversified away by investing in both ADEIA P and Image Protect 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 ADEIA P and Image Protect into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ADEIA P and Image Protect, you can compare the effects of market volatilities on ADEIA P and Image Protect 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 ADEIA P with a short position of Image Protect. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADEIA P and Image Protect.

Diversification Opportunities for ADEIA P and Image Protect

0.22

Correlation Coefficient

ADEIA P  Image Protect

Modest diversification

The 3 months correlation between ADEIA and Image is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ADEIA P and Image Protect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Image Protect and ADEIA P 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 ADEIA P are associated (or correlated) with Image Protect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Image Protect has no effect on the direction of ADEIA P i.e., ADEIA P and Image Protect go up and down completely randomly.

Pair Corralation between ADEIA P and Image Protect

Given the investment horizon of 90 days ADEIA P is expected to generate 91.39 times less return on investment than Image Protect. But when comparing it to its historical volatility, ADEIA P is 21.49 times less risky than Image Protect. It trades about 0.03 of its potential returns per unit of risk. Image Protect is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Image Protect on August 31, 2024 and sell it today you would lose (0.01) from holding Image Protect or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

ADEIA P  vs.  Image Protect

ADEIA P

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ADEIA P are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, ADEIA P is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Image Protect

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Image Protect are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Image Protect disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADEIA P and Image Protect

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

The idea behind ADEIA P and Image Protect 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.