Correlation Between Adyen NV and Bath Body

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

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

Diversification Opportunities for Adyen NV and Bath Body

0.15

Correlation Coefficient

Adyen NV  Bath Body

Average diversification

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

Pair Corralation between Adyen NV and Bath Body

Assuming the 90 days horizon Adyen NV is expected to generate 0.94 times more return on investment than Bath Body. However, Adyen NV is 1.06 times less risky than Bath Body. It trades about 0.03 of its potential returns per unit of risk. Bath Body Works is currently generating about 0.01 per unit of risk. If you would invest  1,307  in Adyen NV on October 5, 2024 and sell it today you would earn a total of  159.00  from holding Adyen NV or generate 12.17% return on investment over 90 days.

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

Adyen NV  vs.  Bath Body Works

Adyen NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bath Body Works

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bath Body Works are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Bath Body unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adyen NV and Bath Body

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

The idea behind Adyen NV and Bath Body Works 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.