Correlation Between Adyen NV and Zeon

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

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

Diversification Opportunities for Adyen NV and Zeon

-0.21

Correlation Coefficient

Adyen NV  Zeon

Very good diversification

The 3 months correlation between Adyen and Zeon is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Adyen NV and Zeon Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zeon 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 Zeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zeon has no effect on the direction of Adyen NV i.e., Adyen NV and Zeon go up and down completely randomly.

Pair Corralation between Adyen NV and Zeon

Assuming the 90 days horizon Adyen NV is expected to generate 1.55 times more return on investment than Zeon. However, Adyen NV is 1.55 times more volatile than Zeon Corporation. It trades about 0.02 of its potential returns per unit of risk. Zeon Corporation is currently generating about 0.01 per unit of risk. If you would invest  1,497  in Adyen NV on October 5, 2024 and sell it today you would lose (31.00) from holding Adyen NV or give up 2.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.6%
Values	Daily Returns

Adyen NV  vs.  Zeon Corp.

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.

Zeon

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zeon Corporation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Zeon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Adyen NV and Zeon

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

The idea behind Adyen NV and Zeon Corporation 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.