Correlation Between Adams Natural and Tri Continental

Can any of the company-specific risk be diversified away by investing in both Adams Natural and Tri Continental 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 Tri Continental 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 Tri Continental Closed, you can compare the effects of market volatilities on Adams Natural and Tri Continental 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 Tri Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Natural and Tri Continental.

Diversification Opportunities for Adams Natural and Tri Continental

0.71

Correlation Coefficient

Adams Natural  Tri Continental

Poor diversification

The 3 months correlation between Adams and Tri is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and Tri Continental Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Continental Closed 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 Tri Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Continental Closed has no effect on the direction of Adams Natural i.e., Adams Natural and Tri Continental go up and down completely randomly.

Pair Corralation between Adams Natural and Tri Continental

Considering the 90-day investment horizon Adams Natural Resources is expected to under-perform the Tri Continental. In addition to that, Adams Natural is 1.12 times more volatile than Tri Continental Closed. It trades about -0.21 of its total potential returns per unit of risk. Tri Continental Closed is currently generating about -0.08 per unit of volatility. If you would invest  3,037  in Tri Continental Closed on February 5, 2024 and sell it today you would lose (45.00) from holding Tri Continental Closed or give up 1.48% of portfolio value over 90 days.

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

Adams Natural Resources  vs.  Tri Continental Closed

Adams Natural Resources

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of very uncertain technical and fundamental indicators, Adams Natural may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Tri Continental Closed

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tri Continental Closed are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Tri Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Adams Natural and Tri Continental

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

The idea behind Adams Natural Resources and Tri Continental Closed 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.