Correlation Between Rand Capital and Adams Natural

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

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

Diversification Opportunities for Rand Capital and Adams Natural

-0.44

Correlation Coefficient

Rand Capital  Adams Natural

Very good diversification

The 3 months correlation between Rand and Adams is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Rand Capital Corp 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 Rand Capital 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 Rand Capital Corp 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 Rand Capital i.e., Rand Capital and Adams Natural go up and down completely randomly.

Pair Corralation between Rand Capital and Adams Natural

Given the investment horizon of 90 days Rand Capital Corp is expected to generate 2.35 times more return on investment than Adams Natural. However, Rand Capital is 2.35 times more volatile than Adams Natural Resources. It trades about 0.05 of its potential returns per unit of risk. Adams Natural Resources is currently generating about 0.1 per unit of risk. If you would invest  1,289  in Rand Capital Corp on September 4, 2024 and sell it today you would earn a total of  338.00  from holding Rand Capital Corp or generate 26.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.17%
Values	Daily Returns

Rand Capital Corp  vs.  Adams Natural Resources

Rand Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rand Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Adams Natural Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 11 (%) 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 January 2025.

Pair Trading with Rand Capital and Adams Natural

The main advantage of trading using opposite Rand Capital and Adams Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rand Capital 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 Rand Capital Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.