Correlation Between 5N Plus and ADF

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

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

Diversification Opportunities for 5N Plus and ADF

0.79

Correlation Coefficient

5N Plus  ADF

Poor diversification

The 3 months correlation between FPLSF and ADF is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding 5N Plus and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group and 5N Plus 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 5N Plus 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 5N Plus i.e., 5N Plus and ADF go up and down completely randomly.

Pair Corralation between 5N Plus and ADF

Assuming the 90 days horizon 5N Plus is expected to generate 1.06 times more return on investment than ADF. However, 5N Plus is 1.06 times more volatile than ADF Group. It trades about 0.07 of its potential returns per unit of risk. ADF Group is currently generating about 0.06 per unit of risk. If you would invest  291.00  in 5N Plus on May 4, 2025 and sell it today you would earn a total of  609.00  from holding 5N Plus or generate 209.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.82%
Values	Daily Returns

5N Plus  vs.  ADF Group

5N Plus

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 5N Plus are ranked lower than 23 (%) 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.

ADF Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Group are ranked lower than 8 (%) 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.

Pair Trading with 5N Plus and ADF

The main advantage of trading using opposite 5N Plus and ADF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 5N Plus 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 5N Plus 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.