Correlation Between Federal Signal and Aduro Clean

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

By analyzing existing cross correlation between Federal Signal and Aduro Clean Technologies, you can compare the effects of market volatilities on Federal Signal and Aduro Clean 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 Federal Signal with a short position of Aduro Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and Aduro Clean.

Diversification Opportunities for Federal Signal and Aduro Clean

0.72

Correlation Coefficient

Federal Signal  Aduro Clean

Poor diversification

The 3 months correlation between Federal and Aduro is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and Aduro Clean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aduro Clean Technologies and Federal Signal 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 Federal Signal are associated (or correlated) with Aduro Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aduro Clean Technologies has no effect on the direction of Federal Signal i.e., Federal Signal and Aduro Clean go up and down completely randomly.

Pair Corralation between Federal Signal and Aduro Clean

Considering the 90-day investment horizon Federal Signal is expected to under-perform the Aduro Clean. But the stock apears to be less risky and, when comparing its historical volatility, Federal Signal is 1.33 times less risky than Aduro Clean. The stock trades about -0.13 of its potential returns per unit of risk. The Aduro Clean Technologies is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  625.00  in Aduro Clean Technologies on December 28, 2024 and sell it today you would lose (110.00) from holding Aduro Clean Technologies or give up 17.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Federal Signal  vs.  Aduro Clean Technologies

Federal Signal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Signal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Aduro Clean Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aduro Clean Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Federal Signal and Aduro Clean

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

The idea behind Federal Signal and Aduro Clean Technologies 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.