Correlation Between Adocia and Winfarm

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

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

Diversification Opportunities for Adocia and Winfarm

-0.55

Correlation Coefficient

Adocia  Winfarm

Excellent diversification

The 3 months correlation between Adocia and Winfarm is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Adocia and Winfarm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winfarm and Adocia 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 Adocia are associated (or correlated) with Winfarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winfarm has no effect on the direction of Adocia i.e., Adocia and Winfarm go up and down completely randomly.

Pair Corralation between Adocia and Winfarm

Assuming the 90 days trading horizon Adocia is expected to generate 1.09 times more return on investment than Winfarm. However, Adocia is 1.09 times more volatile than Winfarm. It trades about 0.01 of its potential returns per unit of risk. Winfarm is currently generating about 0.0 per unit of risk. If you would invest  885.00  in Adocia on September 15, 2024 and sell it today you would lose (171.00) from holding Adocia or give up 19.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.64%
Values	Daily Returns

Adocia  vs.  Winfarm

Adocia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adocia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Adocia sustained solid returns over the last few months and may actually be approaching a breakup point.

Winfarm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winfarm has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Winfarm is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Adocia and Winfarm

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

The idea behind Adocia and Winfarm 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.