Correlation Between Adyen NV and Invesco DWA

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

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

Diversification Opportunities for Adyen NV and Invesco DWA

-0.15

Correlation Coefficient

Adyen NV  Invesco DWA

Good diversification

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

Pair Corralation between Adyen NV and Invesco DWA

Assuming the 90 days horizon Adyen NV is expected to generate 1.89 times less return on investment than Invesco DWA. In addition to that, Adyen NV is 1.87 times more volatile than Invesco DWA Technology. It trades about 0.02 of its total potential returns per unit of risk. Invesco DWA Technology is currently generating about 0.07 per unit of volatility. If you would invest  4,000  in Invesco DWA Technology on October 21, 2024 and sell it today you would earn a total of  3,077  from holding Invesco DWA Technology or generate 76.93% return on investment over 90 days.

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

Adyen NV  vs.  Invesco DWA Technology

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.

Invesco DWA Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Invesco DWA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Adyen NV and Invesco DWA

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

The idea behind Adyen NV and Invesco DWA Technology 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.