Correlation Between Clarke and ADF

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

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

Diversification Opportunities for Clarke and ADF

0.23

Correlation Coefficient

Clarke  ADF

Modest diversification

The 3 months correlation between Clarke and ADF is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Clarke Inc and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group and Clarke 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 Clarke Inc are associated (or correlated) with ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Clarke i.e., Clarke and ADF go up and down completely randomly.

Pair Corralation between Clarke and ADF

Assuming the 90 days trading horizon Clarke Inc is expected to generate 0.53 times more return on investment than ADF. However, Clarke Inc is 1.9 times less risky than ADF. It trades about 0.26 of its potential returns per unit of risk. ADF Group is currently generating about 0.13 per unit of risk. If you would invest  2,245  in Clarke Inc on May 2, 2025 and sell it today you would earn a total of  1,404  from holding Clarke Inc or generate 62.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Clarke Inc  vs.  ADF Group

Clarke Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clarke Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Clarke displayed solid returns over the last few months and may actually be approaching a breakup point.

ADF Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, ADF displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clarke and ADF

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

The idea behind Clarke Inc and ADF Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.