Correlation Between ADF and Ceres Global

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

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

Diversification Opportunities for ADF and Ceres Global

-0.71

Correlation Coefficient

ADF  Ceres Global

Pay attention - limited upside

The 3 months correlation between ADF and Ceres is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and Ceres Global Ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceres Global Ag and ADF 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 ADF Group are associated (or correlated) with Ceres Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceres Global Ag has no effect on the direction of ADF i.e., ADF and Ceres Global go up and down completely randomly.

Pair Corralation between ADF and Ceres Global

Assuming the 90 days trading horizon ADF Group is expected to generate 1.49 times more return on investment than Ceres Global. However, ADF is 1.49 times more volatile than Ceres Global Ag. It trades about 0.01 of its potential returns per unit of risk. Ceres Global Ag is currently generating about -0.13 per unit of risk. If you would invest  974.00  in ADF Group on September 4, 2024 and sell it today you would lose (4.00) from holding ADF Group or give up 0.41% of portfolio value over 90 days.

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

ADF Group  vs.  Ceres Global Ag

ADF Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADF Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ceres Global Ag

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ceres Global Ag are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ceres Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADF and Ceres Global

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

The idea behind ADF Group and Ceres Global Ag 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.