Correlation Between Generation Alpha and ADS TEC

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

By analyzing existing cross correlation between Generation Alpha and ADS TEC ENERGY PLC, you can compare the effects of market volatilities on Generation Alpha and ADS TEC 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 Generation Alpha with a short position of ADS TEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generation Alpha and ADS TEC.

Diversification Opportunities for Generation Alpha and ADS TEC

0.37

Correlation Coefficient

Generation Alpha  ADS TEC

Weak diversification

The 3 months correlation between Generation and ADS is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Generation Alpha and ADS TEC ENERGY PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADS TEC ENERGY and Generation Alpha 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 Generation Alpha are associated (or correlated) with ADS TEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADS TEC ENERGY has no effect on the direction of Generation Alpha i.e., Generation Alpha and ADS TEC go up and down completely randomly.

Pair Corralation between Generation Alpha and ADS TEC

Given the investment horizon of 90 days Generation Alpha is expected to generate 5.45 times more return on investment than ADS TEC. However, Generation Alpha is 5.45 times more volatile than ADS TEC ENERGY PLC. It trades about 0.09 of its potential returns per unit of risk. ADS TEC ENERGY PLC is currently generating about 0.11 per unit of risk. If you would invest  0.01  in Generation Alpha on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Generation Alpha or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

Generation Alpha  vs.  ADS TEC ENERGY PLC

Generation Alpha

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Generation Alpha are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Generation Alpha disclosed solid returns over the last few months and may actually be approaching a breakup point.

ADS TEC ENERGY

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADS TEC ENERGY PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, ADS TEC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Generation Alpha and ADS TEC

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

The idea behind Generation Alpha and ADS TEC ENERGY PLC 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.