Correlation Between Adams Natural and Japan Smaller

Can any of the company-specific risk be diversified away by investing in both Adams Natural and Japan Smaller 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 Japan Smaller 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 Japan Smaller Capitalization, you can compare the effects of market volatilities on Adams Natural and Japan Smaller 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 Japan Smaller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Natural and Japan Smaller.

Diversification Opportunities for Adams Natural and Japan Smaller

-0.35

Correlation Coefficient

Adams Natural  Japan Smaller

Very good diversification

The 3 months correlation between Adams and Japan is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and Japan Smaller Capitalization in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Smaller Capita 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 Japan Smaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Smaller Capita has no effect on the direction of Adams Natural i.e., Adams Natural and Japan Smaller go up and down completely randomly.

Pair Corralation between Adams Natural and Japan Smaller

Considering the 90-day investment horizon Adams Natural is expected to generate 1.34 times less return on investment than Japan Smaller. In addition to that, Adams Natural is 1.2 times more volatile than Japan Smaller Capitalization. It trades about 0.04 of its total potential returns per unit of risk. Japan Smaller Capitalization is currently generating about 0.06 per unit of volatility. If you would invest  622.00  in Japan Smaller Capitalization on September 13, 2024 and sell it today you would earn a total of  178.00  from holding Japan Smaller Capitalization or generate 28.62% 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.  Japan Smaller Capitalization

Adams Natural Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 7 (%) 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.

Japan Smaller Capita

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Smaller Capitalization are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Japan Smaller is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Adams Natural and Japan Smaller

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

The idea behind Adams Natural Resources and Japan Smaller Capitalization 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.