Correlation Between Adams Natural and Tsmxx

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

Diversification Opportunities for Adams Natural and Tsmxx

-0.42

Correlation Coefficient

Adams Natural  Tsmxx

Very good diversification

The 3 months correlation between Adams and Tsmxx is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and Tsmxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsmxx 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 Tsmxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsmxx has no effect on the direction of Adams Natural i.e., Adams Natural and Tsmxx go up and down completely randomly.

Pair Corralation between Adams Natural and Tsmxx

Considering the 90-day investment horizon Adams Natural is expected to generate 115.97 times less return on investment than Tsmxx. But when comparing it to its historical volatility, Adams Natural Resources is 74.9 times less risky than Tsmxx. It trades about 0.11 of its potential returns per unit of risk. Tsmxx is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  435.00  in Tsmxx on December 19, 2024 and sell it today you would lose (335.00) from holding Tsmxx or give up 77.01% of portfolio value over 90 days.

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

Adams Natural Resources  vs.  Tsmxx

Adams Natural Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile technical and fundamental indicators, Adams Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Tsmxx

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsmxx are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Tsmxx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adams Natural and Tsmxx

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

The idea behind Adams Natural Resources and Tsmxx 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..