Correlation Between Global Payments and ADM Endeavors

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

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

Diversification Opportunities for Global Payments and ADM Endeavors

0.65

Correlation Coefficient

Global Payments  ADM Endeavors

Poor diversification

The 3 months correlation between Global and ADM is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Global Payments and ADM Endeavors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADM Endeavors and Global Payments 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 Global Payments are associated (or correlated) with ADM Endeavors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADM Endeavors has no effect on the direction of Global Payments i.e., Global Payments and ADM Endeavors go up and down completely randomly.

Pair Corralation between Global Payments and ADM Endeavors

Considering the 90-day investment horizon Global Payments is expected to generate 0.25 times more return on investment than ADM Endeavors. However, Global Payments is 3.94 times less risky than ADM Endeavors. It trades about -0.18 of its potential returns per unit of risk. ADM Endeavors is currently generating about -0.06 per unit of risk. If you would invest  11,870  in Global Payments on November 29, 2024 and sell it today you would lose (1,718) from holding Global Payments or give up 14.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Global Payments  vs.  ADM Endeavors

Global Payments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Payments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ADM Endeavors

Risk-Adjusted Performance

Very Weak

Over the last 90 days ADM Endeavors 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 primary indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Global Payments and ADM Endeavors

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

The idea behind Global Payments and ADM Endeavors 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.