Correlation Between SPAR and ADM Endeavors

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

By analyzing existing cross correlation between SPAR Group and ADM Endeavors, you can compare the effects of market volatilities on SPAR and ADM Endeavors 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 SPAR with a short position of ADM Endeavors. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPAR and ADM Endeavors.

Diversification Opportunities for SPAR and ADM Endeavors

-0.21

Correlation Coefficient

SPAR  ADM Endeavors

Very good diversification

The 3 months correlation between SPAR and ADM is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding SPAR Group and ADM Endeavors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADM Endeavors and SPAR 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 SPAR Group are associated (or correlated) with ADM Endeavors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADM Endeavors has no effect on the direction of SPAR i.e., SPAR and ADM Endeavors go up and down completely randomly.

Pair Corralation between SPAR and ADM Endeavors

Given the investment horizon of 90 days SPAR Group is expected to generate 0.67 times more return on investment than ADM Endeavors. However, SPAR Group is 1.5 times less risky than ADM Endeavors. It trades about 0.04 of its potential returns per unit of risk. ADM Endeavors is currently generating about 0.03 per unit of risk. If you would invest  131.00  in SPAR Group on August 31, 2024 and sell it today you would earn a total of  92.00  from holding SPAR Group or generate 70.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

SPAR Group  vs.  ADM Endeavors

SPAR Group

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days SPAR Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

ADM Endeavors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADM Endeavors has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with SPAR and ADM Endeavors

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

The idea behind SPAR Group and ADM Endeavors 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.