Correlation Between ADF and 5N Plus

Can any of the company-specific risk be diversified away by investing in both ADF and 5N Plus 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 5N Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ADF Group and 5N Plus, you can compare the effects of market volatilities on ADF and 5N Plus 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 5N Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF and 5N Plus.

Diversification Opportunities for ADF and 5N Plus

0.79

Correlation Coefficient

ADF  5N Plus

Poor diversification

The 3 months correlation between ADF and FPLSF is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and 5N Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 5N Plus 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 5N Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 5N Plus has no effect on the direction of ADF i.e., ADF and 5N Plus go up and down completely randomly.

Pair Corralation between ADF and 5N Plus

Assuming the 90 days horizon ADF is expected to generate 1.09 times less return on investment than 5N Plus. In addition to that, ADF is 1.7 times more volatile than 5N Plus. It trades about 0.15 of its total potential returns per unit of risk. 5N Plus is currently generating about 0.28 per unit of volatility. If you would invest  480.00  in 5N Plus on April 29, 2025 and sell it today you would earn a total of  395.00  from holding 5N Plus or generate 82.29% return on investment over 90 days.

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

ADF Group  vs.  5N Plus

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 unfluctuating forward-looking indicators, ADF reported solid returns over the last few months and may actually be approaching a breakup point.

5N Plus

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 5N Plus are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, 5N Plus reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADF and 5N Plus

The main advantage of trading using opposite ADF and 5N Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADF position performs unexpectedly, 5N Plus 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 5N Plus will offset losses from the drop in 5N Plus' long position.

The idea behind ADF Group and 5N Plus 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.