Correlation Between Adams Natural and Destinations Low

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

By analyzing existing cross correlation between Adams Natural Resources and Destinations Low Duration, you can compare the effects of market volatilities on Adams Natural and Destinations Low 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 Adams Natural with a short position of Destinations Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Natural and Destinations Low.

Diversification Opportunities for Adams Natural and Destinations Low

-0.24

Correlation Coefficient

Adams Natural  Destinations Low

Very good diversification

The 3 months correlation between Adams and Destinations is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and Destinations Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Low Duration and Adams Natural 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 Adams Natural Resources are associated (or correlated) with Destinations Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Low Duration has no effect on the direction of Adams Natural i.e., Adams Natural and Destinations Low go up and down completely randomly.

Pair Corralation between Adams Natural and Destinations Low

Considering the 90-day investment horizon Adams Natural Resources is expected to generate 11.53 times more return on investment than Destinations Low. However, Adams Natural is 11.53 times more volatile than Destinations Low Duration. It trades about 0.05 of its potential returns per unit of risk. Destinations Low Duration is currently generating about 0.2 per unit of risk. If you would invest  2,253  in Adams Natural Resources on October 26, 2024 and sell it today you would earn a total of  55.00  from holding Adams Natural Resources or generate 2.44% return on investment over 90 days.

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

Adams Natural Resources  vs.  Destinations Low Duration

Adams Natural Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy technical and fundamental indicators, Adams Natural is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Destinations Low Duration

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Destinations Low Duration are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Destinations Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Adams Natural and Destinations Low

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

The idea behind Adams Natural Resources and Destinations Low Duration 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.