Correlation Between Top Frontier and Aldel Financial

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

By analyzing existing cross correlation between Top Frontier Investment and Aldel Financial II, you can compare the effects of market volatilities on Top Frontier and Aldel Financial 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 Top Frontier with a short position of Aldel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Frontier and Aldel Financial.

Diversification Opportunities for Top Frontier and Aldel Financial

0.2

Correlation Coefficient

Top Frontier  Aldel Financial

Modest diversification

The 3 months correlation between Top and Aldel is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Top Frontier Investment and Aldel Financial II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldel Financial II and Top Frontier 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 Top Frontier Investment are associated (or correlated) with Aldel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldel Financial II has no effect on the direction of Top Frontier i.e., Top Frontier and Aldel Financial go up and down completely randomly.

Pair Corralation between Top Frontier and Aldel Financial

Assuming the 90 days horizon Top Frontier Investment is expected to under-perform the Aldel Financial. But the otc stock apears to be less risky and, when comparing its historical volatility, Top Frontier Investment is 1.86 times less risky than Aldel Financial. The otc stock trades about -0.13 of its potential returns per unit of risk. The Aldel Financial II is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Aldel Financial II on December 19, 2024 and sell it today you would earn a total of  4.00  from holding Aldel Financial II or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.53%
Values	Daily Returns

Top Frontier Investment  vs.  Aldel Financial II

Top Frontier Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Top Frontier Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Aldel Financial II

Risk-Adjusted Performance

Modest

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

Pair Trading with Top Frontier and Aldel Financial

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

The idea behind Top Frontier Investment and Aldel Financial II 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.