Correlation Between ADF and Fab Form

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

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

Diversification Opportunities for ADF and Fab Form

0.72

Correlation Coefficient

ADF  Fab Form

Poor diversification

The 3 months correlation between ADF and Fab is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and Fab Form Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fab Form Industries 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 Fab Form. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fab Form Industries has no effect on the direction of ADF i.e., ADF and Fab Form go up and down completely randomly.

Pair Corralation between ADF and Fab Form

Assuming the 90 days trading horizon ADF Group is expected to generate 1.65 times more return on investment than Fab Form. However, ADF is 1.65 times more volatile than Fab Form Industries. It trades about 0.1 of its potential returns per unit of risk. Fab Form Industries is currently generating about 0.1 per unit of risk. If you would invest  623.00  in ADF Group on April 24, 2025 and sell it today you would earn a total of  170.00  from holding ADF Group or generate 27.29% 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.  Fab Form Industries

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. In spite of very unfluctuating basic indicators, ADF displayed solid returns over the last few months and may actually be approaching a breakup point.

Fab Form Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fab Form Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fab Form showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADF and Fab Form

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

The idea behind ADF Group and Fab Form Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.