Correlation Between Adobe and CI Financial

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

By analyzing existing cross correlation between Adobe Inc and CI Financial Corp, you can compare the effects of market volatilities on Adobe and CI Financial 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 CI Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adobe and CI Financial.

Diversification Opportunities for Adobe and CI Financial

0.07

Correlation Coefficient

Adobe  CI Financial

Significant diversification

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

Pair Corralation between Adobe and CI Financial

Assuming the 90 days trading horizon Adobe Inc is expected to under-perform the CI Financial. But the stock apears to be less risky and, when comparing its historical volatility, Adobe Inc is 1.11 times less risky than CI Financial. The stock trades about -0.02 of its potential returns per unit of risk. The CI Financial Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,111  in CI Financial Corp on October 11, 2024 and sell it today you would earn a total of  1,991  from holding CI Financial Corp or generate 179.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	66.46%
Values	Daily Returns

Adobe Inc  vs.  CI Financial Corp

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. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CI Financial Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CI Financial Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CI Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adobe and CI Financial

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

The idea behind Adobe Inc and CI Financial Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.