Correlation Between Adobe Systems and Adyen NV

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

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

Diversification Opportunities for Adobe Systems and Adyen NV

-0.09

Correlation Coefficient

Adobe Systems  Adyen NV

Good diversification

The 3 months correlation between Adobe and Adyen is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Systems Incorporated and Adyen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adyen NV and Adobe Systems 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 Systems Incorporated 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 Adobe Systems i.e., Adobe Systems and Adyen NV go up and down completely randomly.

Pair Corralation between Adobe Systems and Adyen NV

Given the investment horizon of 90 days Adobe Systems Incorporated is expected to under-perform the Adyen NV. In addition to that, Adobe Systems is 1.0 times more volatile than Adyen NV. It trades about -0.04 of its total potential returns per unit of risk. Adyen NV is currently generating about 0.07 per unit of volatility. If you would invest  1,443  in Adyen NV on September 12, 2024 and sell it today you would earn a total of  116.00  from holding Adyen NV or generate 8.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Adobe Systems Incorporated  vs.  Adyen NV

Adobe Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Systems Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Adobe Systems is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Adyen NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adyen NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Adyen NV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Adobe Systems and Adyen NV

The main advantage of trading using opposite Adobe Systems and Adyen NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adobe Systems 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 Adobe Systems Incorporated 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.