Correlation Between Adobe and CrowdStrike Holdings

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

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

Diversification Opportunities for Adobe and CrowdStrike Holdings

0.43

Correlation Coefficient

Adobe  CrowdStrike Holdings

Very weak diversification

The 3 months correlation between Adobe and CrowdStrike is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Inc and CrowdStrike Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CrowdStrike Holdings and Adobe 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 Adobe Inc are associated (or correlated) with CrowdStrike Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CrowdStrike Holdings has no effect on the direction of Adobe i.e., Adobe and CrowdStrike Holdings go up and down completely randomly.

Pair Corralation between Adobe and CrowdStrike Holdings

Assuming the 90 days horizon Adobe Inc is expected to under-perform the CrowdStrike Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Adobe Inc is 1.01 times less risky than CrowdStrike Holdings. The stock trades about -0.15 of its potential returns per unit of risk. The CrowdStrike Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  34,335  in CrowdStrike Holdings on September 22, 2024 and sell it today you would earn a total of  590.00  from holding CrowdStrike Holdings or generate 1.72% return on investment over 90 days.

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

Adobe Inc  vs.  CrowdStrike Holdings

Adobe Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CrowdStrike Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CrowdStrike Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CrowdStrike Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adobe and CrowdStrike Holdings

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

The idea behind Adobe Inc and CrowdStrike Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.