Correlation Between Ampleforth and ADX

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

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

Diversification Opportunities for Ampleforth and ADX

0.25

Correlation Coefficient

Ampleforth  ADX

Modest diversification

The 3 months correlation between Ampleforth and ADX is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ampleforth and ADX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADX and Ampleforth 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 Ampleforth are associated (or correlated) with ADX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADX has no effect on the direction of Ampleforth i.e., Ampleforth and ADX go up and down completely randomly.

Pair Corralation between Ampleforth and ADX

Assuming the 90 days trading horizon Ampleforth is expected to generate 1.45 times more return on investment than ADX. However, Ampleforth is 1.45 times more volatile than ADX. It trades about -0.01 of its potential returns per unit of risk. ADX is currently generating about -0.13 per unit of risk. If you would invest  135.00  in Ampleforth on January 24, 2024 and sell it today you would lose (19.00) from holding Ampleforth or give up 14.07% of portfolio value over 90 days.

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

Ampleforth  vs.  ADX

Ampleforth

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ampleforth are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Ampleforth exhibited solid returns over the last few months and may actually be approaching a breakup point.

ADX

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Ampleforth and ADX

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

The idea behind Ampleforth and ADX 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 Global Correlations module to find global opportunities by holding instruments from different markets.