Correlation Between College Retirement and Adams Natural

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

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

Diversification Opportunities for College Retirement and Adams Natural

0.4

Correlation Coefficient

College Retirement  Adams Natural

Very weak diversification

The 3 months correlation between College and Adams is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding College Retirement Equities and Adams Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Natural Resources and College Retirement 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 College Retirement Equities are associated (or correlated) with Adams Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Natural Resources has no effect on the direction of College Retirement i.e., College Retirement and Adams Natural go up and down completely randomly.

Pair Corralation between College Retirement and Adams Natural

Assuming the 90 days trading horizon College Retirement Equities is expected to under-perform the Adams Natural. But the fund apears to be less risky and, when comparing its historical volatility, College Retirement Equities is 1.17 times less risky than Adams Natural. The fund trades about -0.06 of its potential returns per unit of risk. The Adams Natural Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,099  in Adams Natural Resources on December 28, 2024 and sell it today you would earn a total of  167.00  from holding Adams Natural Resources or generate 7.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

College Retirement Equities  vs.  Adams Natural Resources

College Retirement

Risk-Adjusted Performance

Very Weak

Over the last 90 days College Retirement Equities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, College Retirement is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with College Retirement and Adams Natural

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

The idea behind College Retirement Equities and Adams Natural Resources 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.