Correlation Between Supremex and ADF

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

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

Diversification Opportunities for Supremex and ADF

-0.48

Correlation Coefficient

Supremex  ADF

Very good diversification

The 3 months correlation between Supremex and ADF is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Supremex and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group and Supremex 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 Supremex are associated (or correlated) with ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Supremex i.e., Supremex and ADF go up and down completely randomly.

Pair Corralation between Supremex and ADF

Assuming the 90 days trading horizon Supremex is expected to generate 0.69 times more return on investment than ADF. However, Supremex is 1.45 times less risky than ADF. It trades about 0.08 of its potential returns per unit of risk. ADF Group is currently generating about -0.1 per unit of risk. If you would invest  366.00  in Supremex on December 29, 2024 and sell it today you would earn a total of  42.00  from holding Supremex or generate 11.48% return on investment over 90 days.

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

Supremex  vs.  ADF Group

Supremex

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Supremex are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Supremex displayed solid returns over the last few months and may actually be approaching a breakup point.

ADF Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days ADF Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Supremex and ADF

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

The idea behind Supremex and ADF Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.