Correlation Between ADX and Kool2play

Can any of the company-specific risk be diversified away by investing in both ADX and Kool2play 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 ADX and Kool2play into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ADX and Kool2play SA, you can compare the effects of market volatilities on ADX and Kool2play 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 ADX with a short position of Kool2play. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADX and Kool2play.

Diversification Opportunities for ADX and Kool2play

0.34

Correlation Coefficient

ADX  Kool2play

Weak diversification

The 3 months correlation between ADX and Kool2play is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ADX and Kool2play SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kool2play SA and ADX 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 ADX are associated (or correlated) with Kool2play. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kool2play SA has no effect on the direction of ADX i.e., ADX and Kool2play go up and down completely randomly.

Pair Corralation between ADX and Kool2play

Assuming the 90 days trading horizon ADX is expected to generate 0.8 times more return on investment than Kool2play. However, ADX is 1.24 times less risky than Kool2play. It trades about -0.05 of its potential returns per unit of risk. Kool2play SA is currently generating about -0.05 per unit of risk. If you would invest  29.00  in ADX on September 2, 2024 and sell it today you would lose (3.00) from holding ADX or give up 10.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.73%
Values	Daily Returns

ADX  vs.  Kool2play SA

ADX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADX has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Kool2play SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kool2play SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with ADX and Kool2play

The main advantage of trading using opposite ADX and Kool2play positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADX position performs unexpectedly, Kool2play 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 Kool2play will offset losses from the drop in Kool2play's long position.

The idea behind ADX and Kool2play SA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.