Correlation Between Adams Resources and Aemetis

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

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

Diversification Opportunities for Adams Resources and Aemetis

0.83

Correlation Coefficient

Adams Resources  Aemetis

Very poor diversification

The 3 months correlation between Adams and Aemetis is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Adams Resources Energy and Aemetis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aemetis and Adams Resources 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 Adams Resources Energy are associated (or correlated) with Aemetis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aemetis has no effect on the direction of Adams Resources i.e., Adams Resources and Aemetis go up and down completely randomly.

Pair Corralation between Adams Resources and Aemetis

Allowing for the 90-day total investment horizon Adams Resources Energy is expected to generate 0.56 times more return on investment than Aemetis. However, Adams Resources Energy is 1.8 times less risky than Aemetis. It trades about 0.06 of its potential returns per unit of risk. Aemetis is currently generating about -0.01 per unit of risk. If you would invest  2,594  in Adams Resources Energy on September 15, 2024 and sell it today you would earn a total of  1,130  from holding Adams Resources Energy or generate 43.56% return on investment over 90 days.

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

Adams Resources Energy  vs.  Aemetis

Adams Resources Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Resources Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Adams Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aemetis

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aemetis are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Aemetis showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adams Resources and Aemetis

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

The idea behind Adams Resources Energy and Aemetis 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.