Correlation Between ADT and Mistras

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

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

Diversification Opportunities for ADT and Mistras

0.78

Correlation Coefficient

ADT  Mistras

Poor diversification

The 3 months correlation between ADT and Mistras is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ADT Inc and Mistras Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mistras Group and ADT 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 ADT Inc are associated (or correlated) with Mistras. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mistras Group has no effect on the direction of ADT i.e., ADT and Mistras go up and down completely randomly.

Pair Corralation between ADT and Mistras

Considering the 90-day investment horizon ADT Inc is expected to generate 0.86 times more return on investment than Mistras. However, ADT Inc is 1.16 times less risky than Mistras. It trades about 0.15 of its potential returns per unit of risk. Mistras Group is currently generating about 0.12 per unit of risk. If you would invest  693.00  in ADT Inc on December 26, 2024 and sell it today you would earn a total of  123.50  from holding ADT Inc or generate 17.82% return on investment over 90 days.

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

ADT Inc  vs.  Mistras Group

ADT Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADT Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, ADT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mistras Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mistras Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Mistras reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADT and Mistras

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

The idea behind ADT Inc and Mistras Group 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.