Correlation Between Exchange Income and ADF

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

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

Diversification Opportunities for Exchange Income and ADF

-0.84

Correlation Coefficient

Exchange Income  ADF

Pay attention - limited upside

The 3 months correlation between Exchange and ADF is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Income and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group and Exchange Income 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 Exchange Income are associated (or correlated) with ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Exchange Income i.e., Exchange Income and ADF go up and down completely randomly.

Pair Corralation between Exchange Income and ADF

Assuming the 90 days trading horizon Exchange Income is expected to generate 8.8 times less return on investment than ADF. But when comparing it to its historical volatility, Exchange Income is 2.87 times less risky than ADF. It trades about 0.03 of its potential returns per unit of risk. ADF Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  213.00  in ADF Group on September 24, 2024 and sell it today you would earn a total of  806.00  from holding ADF Group or generate 378.4% return on investment over 90 days.

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

Exchange Income  vs.  ADF Group

Exchange Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Exchange Income may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Exchange Income and ADF

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

The idea behind Exchange Income and ADF Group 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.