Correlation Between ADYEN NV and Adyen NV

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

By analyzing existing cross correlation between ADYEN NV UNSPADR001 and Adyen NV, you can compare the effects of market volatilities on ADYEN NV 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 ADYEN NV with a short position of Adyen NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADYEN NV and Adyen NV.

Diversification Opportunities for ADYEN NV and Adyen NV

0.85

Correlation Coefficient

ADYEN NV  Adyen NV

Very poor diversification

The 3 months correlation between ADYEN and Adyen is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ADYEN NV UNSPADR001 and Adyen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adyen NV and ADYEN NV 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 ADYEN NV UNSPADR001 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 ADYEN NV i.e., ADYEN NV and Adyen NV go up and down completely randomly.

Pair Corralation between ADYEN NV and Adyen NV

Assuming the 90 days trading horizon ADYEN NV UNSPADR001 is expected to under-perform the Adyen NV. In addition to that, ADYEN NV is 1.38 times more volatile than Adyen NV. It trades about -0.02 of its total potential returns per unit of risk. Adyen NV is currently generating about 0.05 per unit of volatility. If you would invest  130,800  in Adyen NV on September 3, 2024 and sell it today you would earn a total of  6,840  from holding Adyen NV or generate 5.23% return on investment over 90 days.

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

ADYEN NV UNSPADR001  vs.  Adyen NV

ADYEN NV UNSPADR001

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADYEN NV UNSPADR001 has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

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 fragile basic indicators, Adyen NV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ADYEN NV and Adyen NV

The main advantage of trading using opposite ADYEN NV and Adyen NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADYEN NV 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 ADYEN NV UNSPADR001 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.