Correlation Between Adams Diversified and Large Capital

Can any of the company-specific risk be diversified away by investing in both Adams Diversified and Large Capital 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 Large Capital 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 Large Capital Growth, you can compare the effects of market volatilities on Adams Diversified and Large Capital 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 Large Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Diversified and Large Capital.

Diversification Opportunities for Adams Diversified and Large Capital

0.86

Correlation Coefficient

Adams Diversified  Large Capital

Very poor diversification

The 3 months correlation between Adams and Large is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Adams Diversified Equity and Large Capital Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Capital Growth 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 Large Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Capital Growth has no effect on the direction of Adams Diversified i.e., Adams Diversified and Large Capital go up and down completely randomly.

Pair Corralation between Adams Diversified and Large Capital

Considering the 90-day investment horizon Adams Diversified is expected to generate 8.03 times less return on investment than Large Capital. In addition to that, Adams Diversified is 1.41 times more volatile than Large Capital Growth. It trades about 0.01 of its total potential returns per unit of risk. Large Capital Growth is currently generating about 0.11 per unit of volatility. If you would invest  2,154  in Large Capital Growth on September 12, 2024 and sell it today you would earn a total of  25.00  from holding Large Capital Growth or generate 1.16% return on investment over 90 days.

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

Adams Diversified Equity  vs.  Large Capital Growth

Adams Diversified Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Diversified Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Adams Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Large Capital Growth

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Capital Growth are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Large Capital 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 Large Capital

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

The idea behind Adams Diversified Equity and Large Capital Growth 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.