Correlation Between Trade Desk and Admiral Group

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Can any of the company-specific risk be diversified away by investing in both Trade Desk and Admiral Group 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 Trade Desk and Admiral Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Trade Desk and Admiral Group plc, you can compare the effects of market volatilities on Trade Desk and Admiral Group 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 Trade Desk with a short position of Admiral Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trade Desk and Admiral Group.

Diversification Opportunities for Trade Desk and Admiral Group

-0.71
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Trade and Admiral is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Trade Desk and Admiral Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Admiral Group plc and Trade Desk 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 The Trade Desk are associated (or correlated) with Admiral Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Admiral Group plc has no effect on the direction of Trade Desk i.e., Trade Desk and Admiral Group go up and down completely randomly.

Pair Corralation between Trade Desk and Admiral Group

Assuming the 90 days trading horizon The Trade Desk is expected to generate 2.21 times more return on investment than Admiral Group. However, Trade Desk is 2.21 times more volatile than Admiral Group plc. It trades about 0.16 of its potential returns per unit of risk. Admiral Group plc is currently generating about -0.04 per unit of risk. If you would invest  9,397  in The Trade Desk on September 12, 2024 and sell it today you would earn a total of  3,061  from holding The Trade Desk or generate 32.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

The Trade Desk  vs.  Admiral Group plc

 Performance 
       Timeline  
Trade Desk 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in The Trade Desk are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Trade Desk unveiled solid returns over the last few months and may actually be approaching a breakup point.
Admiral Group plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Admiral Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Admiral Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Trade Desk and Admiral Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Trade Desk and Admiral Group

The main advantage of trading using opposite Trade Desk and Admiral Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Desk position performs unexpectedly, Admiral Group 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 Admiral Group will offset losses from the drop in Admiral Group's long position.
The idea behind The Trade Desk and Admiral Group plc 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.
Check out your portfolio center.
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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