Correlation Between Adidas AG and T MOBILE

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

By analyzing existing cross correlation between adidas AG and T MOBILE INCDL 00001, you can compare the effects of market volatilities on Adidas AG and T MOBILE 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 T MOBILE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adidas AG and T MOBILE.

Diversification Opportunities for Adidas AG and T MOBILE

-0.17

Correlation Coefficient

Adidas AG  T MOBILE

Good diversification

The 3 months correlation between Adidas and TM5 is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding adidas AG and T MOBILE INCDL 00001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T MOBILE INCDL 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 T MOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T MOBILE INCDL has no effect on the direction of Adidas AG i.e., Adidas AG and T MOBILE go up and down completely randomly.

Pair Corralation between Adidas AG and T MOBILE

Assuming the 90 days trading horizon adidas AG is expected to generate 1.15 times more return on investment than T MOBILE. However, Adidas AG is 1.15 times more volatile than T MOBILE INCDL 00001. It trades about 0.23 of its potential returns per unit of risk. T MOBILE INCDL 00001 is currently generating about -0.12 per unit of risk. If you would invest  22,000  in adidas AG on October 25, 2024 and sell it today you would earn a total of  3,770  from holding adidas AG or generate 17.14% return on investment over 90 days.

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

adidas AG  vs.  T MOBILE INCDL 00001

adidas AG

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in adidas AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Adidas AG unveiled solid returns over the last few months and may actually be approaching a breakup point.

T MOBILE INCDL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T MOBILE INCDL 00001 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, T MOBILE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Adidas AG and T MOBILE

The main advantage of trading using opposite Adidas AG and T MOBILE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adidas AG position performs unexpectedly, T MOBILE 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 T MOBILE will offset losses from the drop in T MOBILE's long position.

The idea behind adidas AG and T MOBILE INCDL 00001 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.