Correlation Between ADF and Goodfellow

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

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

Diversification Opportunities for ADF and Goodfellow

0.66

Correlation Coefficient

ADF  Goodfellow

Poor diversification

The 3 months correlation between ADF and Goodfellow is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and Goodfellow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodfellow 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 Goodfellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodfellow has no effect on the direction of ADF i.e., ADF and Goodfellow go up and down completely randomly.

Pair Corralation between ADF and Goodfellow

Assuming the 90 days trading horizon ADF Group is expected to under-perform the Goodfellow. In addition to that, ADF is 2.11 times more volatile than Goodfellow. It trades about -0.1 of its total potential returns per unit of risk. Goodfellow is currently generating about -0.03 per unit of volatility. If you would invest  1,277  in Goodfellow on December 30, 2024 and sell it today you would lose (57.00) from holding Goodfellow or give up 4.46% of portfolio value over 90 days.

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

ADF Group  vs.  Goodfellow

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.

Goodfellow

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goodfellow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Goodfellow is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ADF and Goodfellow

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

The idea behind ADF Group and Goodfellow 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.