Correlation Between Adidas AG and Culp

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

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

Diversification Opportunities for Adidas AG and Culp

-0.15

Correlation Coefficient

Adidas AG  Culp

Good diversification

The 3 months correlation between Adidas and Culp is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Adidas AG and Culp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Culp Inc and Adidas AG 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 Adidas AG are associated (or correlated) with Culp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Culp Inc has no effect on the direction of Adidas AG i.e., Adidas AG and Culp go up and down completely randomly.

Pair Corralation between Adidas AG and Culp

Assuming the 90 days horizon Adidas AG is expected to generate 0.73 times more return on investment than Culp. However, Adidas AG is 1.36 times less risky than Culp. It trades about -0.02 of its potential returns per unit of risk. Culp Inc is currently generating about -0.05 per unit of risk. If you would invest  24,763  in Adidas AG on December 27, 2024 and sell it today you would lose (1,054) from holding Adidas AG or give up 4.26% of portfolio value over 90 days.

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

Adidas AG  vs.  Culp Inc

Adidas AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adidas AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Adidas AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Culp Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Culp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's essential indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Adidas AG and Culp

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

The idea behind Adidas AG and Culp Inc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..