Correlation Between Adams Resources and World Kinect

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

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

Diversification Opportunities for Adams Resources and World Kinect

-0.31

Correlation Coefficient

Adams Resources  World Kinect

Very good diversification

The 3 months correlation between Adams and World is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Adams Resources Energy and World Kinect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Kinect and Adams Resources 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 Resources Energy are associated (or correlated) with World Kinect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Kinect has no effect on the direction of Adams Resources i.e., Adams Resources and World Kinect go up and down completely randomly.

Pair Corralation between Adams Resources and World Kinect

Allowing for the 90-day total investment horizon Adams Resources Energy is expected to generate 1.92 times more return on investment than World Kinect. However, Adams Resources is 1.92 times more volatile than World Kinect. It trades about 0.17 of its potential returns per unit of risk. World Kinect is currently generating about 0.01 per unit of risk. If you would invest  2,396  in Adams Resources Energy on September 13, 2024 and sell it today you would earn a total of  1,329  from holding Adams Resources Energy or generate 55.47% return on investment over 90 days.

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

Adams Resources Energy  vs.  World Kinect

Adams Resources Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Resources Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Adams Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

World Kinect

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days World Kinect has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, World Kinect is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Adams Resources and World Kinect

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

The idea behind Adams Resources Energy and World Kinect 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.