Correlation Between Ads Tec and ADS TEC

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

By analyzing existing cross correlation between Ads Tec Energy and ADS TEC ENERGY PLC, you can compare the effects of market volatilities on Ads Tec and ADS TEC 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 Ads Tec with a short position of ADS TEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ads Tec and ADS TEC.

Diversification Opportunities for Ads Tec and ADS TEC

0.86

Correlation Coefficient

Ads Tec  ADS TEC

Very poor diversification

The 3 months correlation between Ads and ADS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ads Tec Energy and ADS TEC ENERGY PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADS TEC ENERGY and Ads Tec 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 Ads Tec Energy are associated (or correlated) with ADS TEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADS TEC ENERGY has no effect on the direction of Ads Tec i.e., Ads Tec and ADS TEC go up and down completely randomly.

Pair Corralation between Ads Tec and ADS TEC

Given the investment horizon of 90 days Ads Tec Energy is expected to generate 0.37 times more return on investment than ADS TEC. However, Ads Tec Energy is 2.71 times less risky than ADS TEC. It trades about -0.01 of its potential returns per unit of risk. ADS TEC ENERGY PLC is currently generating about -0.02 per unit of risk. If you would invest  1,465  in Ads Tec Energy on December 27, 2024 and sell it today you would lose (32.00) from holding Ads Tec Energy or give up 2.18% of portfolio value over 90 days.

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

Ads Tec Energy  vs.  ADS TEC ENERGY PLC

Ads Tec Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ads Tec Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ads Tec is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ADS TEC ENERGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days ADS TEC ENERGY PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ads Tec and ADS TEC

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

The idea behind Ads Tec Energy and ADS TEC ENERGY PLC 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.