Correlation Between Bridger Aerospace and ADT

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

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

Diversification Opportunities for Bridger Aerospace and ADT

0.65

Correlation Coefficient

Bridger Aerospace  ADT

Poor diversification

The 3 months correlation between Bridger and ADT is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bridger Aerospace Group and ADT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADT Inc and Bridger Aerospace 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 Bridger Aerospace Group are associated (or correlated) with ADT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADT Inc has no effect on the direction of Bridger Aerospace i.e., Bridger Aerospace and ADT go up and down completely randomly.

Pair Corralation between Bridger Aerospace and ADT

Assuming the 90 days horizon Bridger Aerospace Group is expected to generate 13.42 times more return on investment than ADT. However, Bridger Aerospace is 13.42 times more volatile than ADT Inc. It trades about 0.01 of its potential returns per unit of risk. ADT Inc is currently generating about -0.06 per unit of risk. If you would invest  10.00  in Bridger Aerospace Group on October 6, 2024 and sell it today you would lose (3.52) from holding Bridger Aerospace Group or give up 35.2% of portfolio value over 90 days.

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

Bridger Aerospace Group  vs.  ADT Inc

Bridger Aerospace

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bridger Aerospace Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Bridger Aerospace showed solid returns over the last few months and may actually be approaching a breakup point.

ADT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, ADT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bridger Aerospace and ADT

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

The idea behind Bridger Aerospace Group and ADT Inc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.