Correlation Between ADF and First Ottawa

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

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

Diversification Opportunities for ADF and First Ottawa

0.59

Correlation Coefficient

ADF  First Ottawa

Very weak diversification

The 3 months correlation between ADF and First is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and First Ottawa Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Ottawa Bancshares 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 First Ottawa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Ottawa Bancshares has no effect on the direction of ADF i.e., ADF and First Ottawa go up and down completely randomly.

Pair Corralation between ADF and First Ottawa

Assuming the 90 days horizon ADF Group is expected to generate 6.76 times more return on investment than First Ottawa. However, ADF is 6.76 times more volatile than First Ottawa Bancshares. It trades about 0.15 of its potential returns per unit of risk. First Ottawa Bancshares is currently generating about 0.09 per unit of risk. If you would invest  448.00  in ADF Group on April 29, 2025 and sell it today you would earn a total of  281.00  from holding ADF Group or generate 62.72% return on investment over 90 days.

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

ADF Group  vs.  First Ottawa Bancshares

ADF Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, ADF reported solid returns over the last few months and may actually be approaching a breakup point.

First Ottawa Bancshares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Ottawa Bancshares are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Ottawa is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ADF and First Ottawa

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

The idea behind ADF Group and First Ottawa Bancshares 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.