Correlation Between Adams Diversified and Anchor Risk

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

By analyzing existing cross correlation between Adams Diversified Equity and Anchor Risk Managed, you can compare the effects of market volatilities on Adams Diversified and Anchor Risk 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 Adams Diversified with a short position of Anchor Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Diversified and Anchor Risk.

Diversification Opportunities for Adams Diversified and Anchor Risk

0.67

Correlation Coefficient

Adams Diversified  Anchor Risk

Poor diversification

The 3 months correlation between Adams and Anchor is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Adams Diversified Equity and Anchor Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anchor Risk Managed and Adams Diversified 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 Adams Diversified Equity are associated (or correlated) with Anchor Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anchor Risk Managed has no effect on the direction of Adams Diversified i.e., Adams Diversified and Anchor Risk go up and down completely randomly.

Pair Corralation between Adams Diversified and Anchor Risk

Considering the 90-day investment horizon Adams Diversified is expected to generate 4.47 times less return on investment than Anchor Risk. In addition to that, Adams Diversified is 1.16 times more volatile than Anchor Risk Managed. It trades about 0.05 of its total potential returns per unit of risk. Anchor Risk Managed is currently generating about 0.28 per unit of volatility. If you would invest  1,458  in Anchor Risk Managed on September 15, 2024 and sell it today you would earn a total of  55.00  from holding Anchor Risk Managed or generate 3.77% return on investment over 90 days.

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

Adams Diversified Equity  vs.  Anchor Risk Managed

Adams Diversified Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Diversified Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Adams Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anchor Risk Managed

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anchor Risk Managed are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Anchor Risk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Adams Diversified and Anchor Risk

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

The idea behind Adams Diversified Equity and Anchor Risk Managed 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..