Correlation Between Adams Natural and College Retirement

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

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

Diversification Opportunities for Adams Natural and College Retirement

0.57

Correlation Coefficient

Adams Natural  College Retirement

Very weak diversification

The 3 months correlation between Adams and College is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and College Retirement Equities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on College Retirement and Adams Natural 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 Natural Resources are associated (or correlated) with College Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of College Retirement has no effect on the direction of Adams Natural i.e., Adams Natural and College Retirement go up and down completely randomly.

Pair Corralation between Adams Natural and College Retirement

Considering the 90-day investment horizon Adams Natural is expected to generate 2.93 times less return on investment than College Retirement. In addition to that, Adams Natural is 1.38 times more volatile than College Retirement Equities. It trades about 0.04 of its total potential returns per unit of risk. College Retirement Equities is currently generating about 0.18 per unit of volatility. If you would invest  48,092  in College Retirement Equities on September 16, 2024 and sell it today you would earn a total of  3,975  from holding College Retirement Equities or generate 8.27% return on investment over 90 days.

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

Adams Natural Resources  vs.  College Retirement Equities

Adams Natural Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy technical and fundamental indicators, Adams Natural is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

College Retirement

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in College Retirement Equities are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, College Retirement may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Adams Natural and College Retirement

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

The idea behind Adams Natural Resources and College Retirement Equities 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.