Correlation Between ADT and Marlowe Plc

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

By analyzing existing cross correlation between ADT Inc and Marlowe plc, you can compare the effects of market volatilities on ADT and Marlowe Plc 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 Marlowe Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADT and Marlowe Plc.

Diversification Opportunities for ADT and Marlowe Plc

0.53

Correlation Coefficient

ADT  Marlowe Plc

Very weak diversification

The 3 months correlation between ADT and Marlowe is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ADT Inc and Marlowe plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marlowe plc 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 Marlowe Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marlowe plc has no effect on the direction of ADT i.e., ADT and Marlowe Plc go up and down completely randomly.

Pair Corralation between ADT and Marlowe Plc

Considering the 90-day investment horizon ADT Inc is expected to generate 1.13 times more return on investment than Marlowe Plc. However, ADT is 1.13 times more volatile than Marlowe plc. It trades about 0.14 of its potential returns per unit of risk. Marlowe plc is currently generating about 0.11 per unit of risk. If you would invest  687.00  in ADT Inc on December 11, 2024 and sell it today you would earn a total of  82.00  from holding ADT Inc or generate 11.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

ADT Inc  vs.  Marlowe plc

ADT Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ADT Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, ADT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Marlowe plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marlowe plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Marlowe Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ADT and Marlowe Plc

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

The idea behind ADT Inc and Marlowe 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.