Correlation Between Adyen NV and Tsingtao Brewery

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

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

Diversification Opportunities for Adyen NV and Tsingtao Brewery

0.3

Correlation Coefficient

Adyen NV  Tsingtao Brewery

Weak diversification

The 3 months correlation between Adyen and Tsingtao is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Adyen NV and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery 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 Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of Adyen NV i.e., Adyen NV and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Adyen NV and Tsingtao Brewery

Assuming the 90 days horizon Adyen NV is expected to generate 0.78 times more return on investment than Tsingtao Brewery. However, Adyen NV is 1.29 times less risky than Tsingtao Brewery. It trades about 0.07 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.01 per unit of risk. If you would invest  768.00  in Adyen NV on October 4, 2024 and sell it today you would earn a total of  698.00  from holding Adyen NV or generate 90.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	71.6%
Values	Daily Returns

Adyen NV  vs.  Tsingtao Brewery

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.

Tsingtao Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsingtao Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Adyen NV and Tsingtao Brewery

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

The idea behind Adyen NV and Tsingtao Brewery 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.