Correlation Between Logan Ridge and Adams Natural

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

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

Diversification Opportunities for Logan Ridge and Adams Natural

0.75

Correlation Coefficient

Logan Ridge  Adams Natural

Poor diversification

The 3 months correlation between Logan and Adams is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Logan Ridge Finance and Adams Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Natural Resources and Logan Ridge 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 Logan Ridge Finance are associated (or correlated) with Adams Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Natural Resources has no effect on the direction of Logan Ridge i.e., Logan Ridge and Adams Natural go up and down completely randomly.

Pair Corralation between Logan Ridge and Adams Natural

Given the investment horizon of 90 days Logan Ridge Finance is expected to generate 2.06 times more return on investment than Adams Natural. However, Logan Ridge is 2.06 times more volatile than Adams Natural Resources. It trades about 0.19 of its potential returns per unit of risk. Adams Natural Resources is currently generating about 0.16 per unit of risk. If you would invest  2,121  in Logan Ridge Finance on September 3, 2024 and sell it today you would earn a total of  479.00  from holding Logan Ridge Finance or generate 22.58% return on investment over 90 days.

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

Logan Ridge Finance  vs.  Adams Natural Resources

Logan Ridge Finance

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Logan Ridge Finance are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Logan Ridge exhibited solid returns over the last few months and may actually be approaching a breakup point.

Adams Natural Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile technical and fundamental indicators, Adams Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Logan Ridge and Adams Natural

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

The idea behind Logan Ridge Finance and Adams Natural Resources 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.

Check out your portfolio center.

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.