Correlation Between Adyen NV and KEISEI EL

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

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

Diversification Opportunities for Adyen NV and KEISEI EL

0.85

Correlation Coefficient

Adyen NV  KEISEI EL

Very poor diversification

The 3 months correlation between Adyen NV and KEISEI is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Adyen NV and KEISEI EL RAILWAY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEISEI EL RAILWAY 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 KEISEI EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEISEI EL RAILWAY has no effect on the direction of Adyen NV i.e., Adyen NV and KEISEI EL go up and down completely randomly.

Pair Corralation between Adyen NV and KEISEI EL

Assuming the 90 days horizon Adyen NV is expected to generate 1.55 times more return on investment than KEISEI EL. However, Adyen NV is 1.55 times more volatile than KEISEI EL RAILWAY. It trades about 0.08 of its potential returns per unit of risk. KEISEI EL RAILWAY is currently generating about 0.1 per unit of risk. If you would invest  1,476  in Adyen NV on December 22, 2024 and sell it today you would earn a total of  178.00  from holding Adyen NV or generate 12.06% return on investment over 90 days.

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

Adyen NV  vs.  KEISEI EL RAILWAY

Adyen NV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adyen NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Adyen NV showed solid returns over the last few months and may actually be approaching a breakup point.

KEISEI EL RAILWAY

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KEISEI EL RAILWAY are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, KEISEI EL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Adyen NV and KEISEI EL

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

The idea behind Adyen NV and KEISEI EL RAILWAY 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.