Correlation Between Adyen NV and Booking Holdings

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

By analyzing existing cross correlation between Adyen NV and Booking Holdings, you can compare the effects of market volatilities on Adyen NV and Booking Holdings 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 Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adyen NV and Booking Holdings.

Diversification Opportunities for Adyen NV and Booking Holdings

-0.15

Correlation Coefficient

Adyen NV  Booking Holdings

Good diversification

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

Pair Corralation between Adyen NV and Booking Holdings

Assuming the 90 days horizon Adyen NV is expected to generate 3.62 times less return on investment than Booking Holdings. In addition to that, Adyen NV is 1.77 times more volatile than Booking Holdings. It trades about 0.02 of its total potential returns per unit of risk. Booking Holdings is currently generating about 0.11 per unit of volatility. If you would invest  6,516  in Booking Holdings on October 5, 2024 and sell it today you would earn a total of  10,801  from holding Booking Holdings or generate 165.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Adyen NV  vs.  Booking Holdings

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.

Booking Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Booking Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adyen NV and Booking Holdings

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

The idea behind Adyen NV and Booking Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.