Correlation Between ADF and FP Newspapers

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

By analyzing existing cross correlation between ADF Group and FP Newspapers, you can compare the effects of market volatilities on ADF and FP Newspapers 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 FP Newspapers. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF and FP Newspapers.

Diversification Opportunities for ADF and FP Newspapers

-0.32

Correlation Coefficient

ADF  FP Newspapers

Very good diversification

The 3 months correlation between ADF and FP Newspapers is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and FP Newspapers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FP Newspapers 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 FP Newspapers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FP Newspapers has no effect on the direction of ADF i.e., ADF and FP Newspapers go up and down completely randomly.

Pair Corralation between ADF and FP Newspapers

Assuming the 90 days trading horizon ADF Group is expected to under-perform the FP Newspapers. But the stock apears to be less risky and, when comparing its historical volatility, ADF Group is 1.21 times less risky than FP Newspapers. The stock trades about -0.1 of its potential returns per unit of risk. The FP Newspapers is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  48.00  in FP Newspapers on December 23, 2024 and sell it today you would earn a total of  2.00  from holding FP Newspapers or generate 4.17% return on investment over 90 days.

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

ADF Group  vs.  FP Newspapers

ADF Group

Risk-Adjusted Performance

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

FP Newspapers

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FP Newspapers are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, FP Newspapers may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ADF and FP Newspapers

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

The idea behind ADF Group and FP Newspapers 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.