Correlation Between Scottish Mortgage and Adyen NV

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

By analyzing existing cross correlation between Scottish Mortgage Investment and Adyen NV, you can compare the effects of market volatilities on Scottish Mortgage and Adyen NV 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 Scottish Mortgage with a short position of Adyen NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scottish Mortgage and Adyen NV.

Diversification Opportunities for Scottish Mortgage and Adyen NV

0.22

Correlation Coefficient

Scottish Mortgage  Adyen NV

Modest diversification

The 3 months correlation between Scottish and Adyen is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Scottish Mortgage Investment and Adyen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adyen NV and Scottish Mortgage 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 Scottish Mortgage Investment are associated (or correlated) with Adyen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adyen NV has no effect on the direction of Scottish Mortgage i.e., Scottish Mortgage and Adyen NV go up and down completely randomly.

Pair Corralation between Scottish Mortgage and Adyen NV

Assuming the 90 days trading horizon Scottish Mortgage Investment is expected to generate 0.47 times more return on investment than Adyen NV. However, Scottish Mortgage Investment is 2.13 times less risky than Adyen NV. It trades about 0.29 of its potential returns per unit of risk. Adyen NV is currently generating about 0.04 per unit of risk. If you would invest  1,023  in Scottish Mortgage Investment on October 24, 2024 and sell it today you would earn a total of  207.00  from holding Scottish Mortgage Investment or generate 20.23% return on investment over 90 days.

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

Scottish Mortgage Investment  vs.  Adyen NV

Scottish Mortgage

Risk-Adjusted Performance

22 of 100

Solid

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

Adyen NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adyen NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Adyen NV is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Scottish Mortgage and Adyen NV

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

The idea behind Scottish Mortgage Investment and Adyen NV 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.