Correlation Between Adams Natural and Logan Ridge

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

Diversification Opportunities for Adams Natural and Logan Ridge

-0.24

Correlation Coefficient

Adams Natural  Logan Ridge

Very good diversification

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

Pair Corralation between Adams Natural and Logan Ridge

Considering the 90-day investment horizon Adams Natural Resources is expected to generate 0.96 times more return on investment than Logan Ridge. However, Adams Natural Resources is 1.04 times less risky than Logan Ridge. It trades about 0.05 of its potential returns per unit of risk. Logan Ridge Finance is currently generating about 0.04 per unit of risk. If you would invest  1,720  in Adams Natural Resources on December 2, 2024 and sell it today you would earn a total of  513.00  from holding Adams Natural Resources or generate 29.83% 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.  Logan Ridge Finance

Adams Natural Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adams Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. 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.

Logan Ridge Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Logan Ridge Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Logan Ridge is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Adams Natural and Logan Ridge

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

The idea behind Adams Natural Resources and Logan Ridge Finance 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.