Correlation Between Adidas AG and PUMA SE

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

By analyzing existing cross correlation between Adidas AG ADR and PUMA SE, you can compare the effects of market volatilities on Adidas AG and PUMA SE 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 PUMA SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adidas AG and PUMA SE.

Diversification Opportunities for Adidas AG and PUMA SE

-0.77

Correlation Coefficient

Adidas AG  PUMA SE

Pay attention - limited upside

The 3 months correlation between Adidas and PUMA is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Adidas AG ADR and PUMA SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PUMA SE 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 ADR are associated (or correlated) with PUMA SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PUMA SE has no effect on the direction of Adidas AG i.e., Adidas AG and PUMA SE go up and down completely randomly.

Pair Corralation between Adidas AG and PUMA SE

Assuming the 90 days horizon Adidas AG ADR is expected to under-perform the PUMA SE. But the otc stock apears to be less risky and, when comparing its historical volatility, Adidas AG ADR is 1.01 times less risky than PUMA SE. The otc stock trades about -0.05 of its potential returns per unit of risk. The PUMA SE is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  433.00  in PUMA SE on September 1, 2024 and sell it today you would earn a total of  30.00  from holding PUMA SE or generate 6.93% return on investment over 90 days.

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

Adidas AG ADR  vs.  PUMA SE

Adidas AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adidas AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Adidas AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PUMA SE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PUMA SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, PUMA SE may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Adidas AG and PUMA SE

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

The idea behind Adidas AG ADR and PUMA SE 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.