Correlation Between ADYEN NV and SILEON AB

Can any of the company-specific risk be diversified away by investing in both ADYEN NV and SILEON AB 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 SILEON AB 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 SILEON AB ON, you can compare the effects of market volatilities on ADYEN NV and SILEON AB 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 SILEON AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADYEN NV and SILEON AB.

Diversification Opportunities for ADYEN NV and SILEON AB

-0.07

Correlation Coefficient

ADYEN NV  SILEON AB

Good diversification

The 3 months correlation between ADYEN and SILEON is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding ADYEN NV UNSPADR001 and SILEON AB ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SILEON AB ON 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 SILEON AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SILEON AB ON has no effect on the direction of ADYEN NV i.e., ADYEN NV and SILEON AB go up and down completely randomly.

Pair Corralation between ADYEN NV and SILEON AB

Assuming the 90 days trading horizon ADYEN NV UNSPADR001 is expected to generate 0.54 times more return on investment than SILEON AB. However, ADYEN NV UNSPADR001 is 1.87 times less risky than SILEON AB. It trades about 0.16 of its potential returns per unit of risk. SILEON AB ON is currently generating about -0.47 per unit of risk. If you would invest  1,260  in ADYEN NV UNSPADR001 on September 27, 2024 and sell it today you would earn a total of  130.00  from holding ADYEN NV UNSPADR001 or generate 10.32% return on investment over 90 days.

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

ADYEN NV UNSPADR001  vs.  SILEON AB ON

ADYEN NV UNSPADR001

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ADYEN NV UNSPADR001 are ranked lower than 2 (%) 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.

SILEON AB ON

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SILEON AB ON are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SILEON AB reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADYEN NV and SILEON AB

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

The idea behind ADYEN NV UNSPADR001 and SILEON AB ON 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.