Correlation Between Tri Continental and Adams Diversified

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

By analyzing existing cross correlation between Tri Continental Closed and Adams Diversified Equity, you can compare the effects of market volatilities on Tri Continental and Adams Diversified 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 Tri Continental with a short position of Adams Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tri Continental and Adams Diversified.

Diversification Opportunities for Tri Continental and Adams Diversified

0.93

Correlation Coefficient

Tri Continental  Adams Diversified

Almost no diversification

The 3 months correlation between Tri and Adams is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Tri Continental Closed and Adams Diversified Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Diversified Equity and Tri Continental 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 Tri Continental Closed are associated (or correlated) with Adams Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Diversified Equity has no effect on the direction of Tri Continental i.e., Tri Continental and Adams Diversified go up and down completely randomly.

Pair Corralation between Tri Continental and Adams Diversified

Allowing for the 90-day total investment horizon Tri Continental Closed is expected to generate 0.7 times more return on investment than Adams Diversified. However, Tri Continental Closed is 1.43 times less risky than Adams Diversified. It trades about 0.23 of its potential returns per unit of risk. Adams Diversified Equity is currently generating about 0.13 per unit of risk. If you would invest  3,148  in Tri Continental Closed on August 31, 2024 and sell it today you would earn a total of  270.00  from holding Tri Continental Closed or generate 8.58% return on investment over 90 days.

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

Tri Continental Closed  vs.  Adams Diversified Equity

Tri Continental Closed

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tri Continental Closed are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Tri Continental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Adams Diversified Equity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Diversified Equity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Adams Diversified may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Tri Continental and Adams Diversified

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

The idea behind Tri Continental Closed and Adams Diversified Equity 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.