Correlation Between ADT and Supercom

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

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

Diversification Opportunities for ADT and Supercom

0.28

Correlation Coefficient

ADT  Supercom

Modest diversification

The 3 months correlation between ADT and Supercom is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ADT Inc and Supercom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supercom 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 Supercom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supercom has no effect on the direction of ADT i.e., ADT and Supercom go up and down completely randomly.

Pair Corralation between ADT and Supercom

Considering the 90-day investment horizon ADT is expected to generate 4.08 times less return on investment than Supercom. But when comparing it to its historical volatility, ADT Inc is 1.72 times less risky than Supercom. It trades about 0.05 of its potential returns per unit of risk. Supercom is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  269.00  in Supercom on August 30, 2024 and sell it today you would earn a total of  79.00  from holding Supercom or generate 29.37% return on investment over 90 days.

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

ADT Inc  vs.  Supercom

ADT Inc

Risk-Adjusted Performance

3 of 100

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 uncertain fundamental indicators, ADT may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Supercom

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Supercom are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, Supercom sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADT and Supercom

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

The idea behind ADT Inc and Supercom 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.