Correlation Between Adams Natural and Balanced Strategy

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

By analyzing existing cross correlation between Adams Natural Resources and Balanced Strategy Fund, you can compare the effects of market volatilities on Adams Natural and Balanced Strategy 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 Adams Natural with a short position of Balanced Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Natural and Balanced Strategy.

Diversification Opportunities for Adams Natural and Balanced Strategy

0.87

Correlation Coefficient

Adams Natural  Balanced Strategy

Very poor diversification

The 3 months correlation between Adams and Balanced is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Strategy and Adams Natural 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 Adams Natural Resources are associated (or correlated) with Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of Adams Natural i.e., Adams Natural and Balanced Strategy go up and down completely randomly.

Pair Corralation between Adams Natural and Balanced Strategy

Considering the 90-day investment horizon Adams Natural Resources is expected to generate 2.3 times more return on investment than Balanced Strategy. However, Adams Natural is 2.3 times more volatile than Balanced Strategy Fund. It trades about 0.15 of its potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.24 per unit of risk. If you would invest  1,969  in Adams Natural Resources on May 2, 2025 and sell it today you would earn a total of  185.00  from holding Adams Natural Resources or generate 9.4% return on investment over 90 days.

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

Adams Natural Resources  vs.  Balanced Strategy Fund

Adams Natural Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak technical and fundamental indicators, Adams Natural may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Balanced Strategy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Strategy Fund are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Balanced Strategy may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Adams Natural and Balanced Strategy

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

The idea behind Adams Natural Resources and Balanced Strategy Fund 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.