Correlation Between ADF and CompoSecure

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

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

Diversification Opportunities for ADF and CompoSecure

0.3

Correlation Coefficient

ADF  CompoSecure

Weak diversification

The 3 months correlation between ADF and CompoSecure is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure 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 CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of ADF i.e., ADF and CompoSecure go up and down completely randomly.

Pair Corralation between ADF and CompoSecure

Assuming the 90 days horizon ADF is expected to generate 2.17 times less return on investment than CompoSecure. In addition to that, ADF is 1.79 times more volatile than CompoSecure. It trades about 0.05 of its total potential returns per unit of risk. CompoSecure is currently generating about 0.2 per unit of volatility. If you would invest  1,349  in CompoSecure on May 25, 2025 and sell it today you would earn a total of  635.00  from holding CompoSecure or generate 47.07% return on investment over 90 days.

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

ADF Group  vs.  CompoSecure

ADF Group

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking indicators, ADF reported solid returns over the last few months and may actually be approaching a breakup point.

CompoSecure

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CompoSecure are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CompoSecure displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADF and CompoSecure

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

The idea behind ADF Group and CompoSecure 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.