Correlation Between Abak SA and ADX

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

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

Diversification Opportunities for Abak SA and ADX

-0.09

Correlation Coefficient

Abak SA  ADX

Good diversification

The 3 months correlation between Abak and ADX is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Abak SA and ADX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADX and Abak SA 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 Abak SA are associated (or correlated) with ADX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADX has no effect on the direction of Abak SA i.e., Abak SA and ADX go up and down completely randomly.

Pair Corralation between Abak SA and ADX

Assuming the 90 days trading horizon Abak SA is expected to generate 0.6 times more return on investment than ADX. However, Abak SA is 1.67 times less risky than ADX. It trades about 0.06 of its potential returns per unit of risk. ADX is currently generating about 0.03 per unit of risk. If you would invest  258.00  in Abak SA on September 26, 2024 and sell it today you would earn a total of  98.00  from holding Abak SA or generate 37.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.34%
Values	Daily Returns

Abak SA  vs.  ADX

Abak SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abak SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ADX

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ADX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ADX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Abak SA and ADX

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

The idea behind Abak SA and ADX 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.