Correlation Between ADF and Lassonde Industries

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

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

Diversification Opportunities for ADF and Lassonde Industries

-0.39

Correlation Coefficient

ADF  Lassonde Industries

Very good diversification

The 3 months correlation between ADF and Lassonde is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and Lassonde Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lassonde Industries 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 Lassonde Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lassonde Industries has no effect on the direction of ADF i.e., ADF and Lassonde Industries go up and down completely randomly.

Pair Corralation between ADF and Lassonde Industries

Assuming the 90 days trading horizon ADF Group is expected to under-perform the Lassonde Industries. In addition to that, ADF is 1.97 times more volatile than Lassonde Industries. It trades about -0.04 of its total potential returns per unit of risk. Lassonde Industries is currently generating about -0.01 per unit of volatility. If you would invest  17,680  in Lassonde Industries on September 19, 2024 and sell it today you would lose (363.00) from holding Lassonde Industries or give up 2.05% of portfolio value over 90 days.

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

ADF Group  vs.  Lassonde Industries

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 latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Lassonde Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lassonde Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lassonde Industries is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ADF and Lassonde Industries

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

The idea behind ADF Group and Lassonde Industries 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.