Correlation Between ADF and Chesswood Group

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

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

Diversification Opportunities for ADF and Chesswood Group

0.0

Correlation Coefficient

ADF  Chesswood Group

Pay attention - limited upside

The 3 months correlation between ADF and Chesswood is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and Chesswood Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesswood Group and ADF 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 ADF Group are associated (or correlated) with Chesswood Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesswood Group has no effect on the direction of ADF i.e., ADF and Chesswood Group go up and down completely randomly.

Pair Corralation between ADF and Chesswood Group

Assuming the 90 days trading horizon ADF Group is expected to generate 0.66 times more return on investment than Chesswood Group. However, ADF Group is 1.52 times less risky than Chesswood Group. It trades about -0.08 of its potential returns per unit of risk. Chesswood Group Limited is currently generating about -0.17 per unit of risk. If you would invest  1,591  in ADF Group on September 23, 2024 and sell it today you would lose (572.00) from holding ADF Group or give up 35.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

ADF Group  vs.  Chesswood Group Limited

ADF Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADF Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ADF is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Chesswood Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesswood Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Chesswood Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ADF and Chesswood Group

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

The idea behind ADF Group and Chesswood Group Limited 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 Anywhere module to track or share privately all of your investments from the convenience of any device.