Correlation Between Allianz SE and Adidas AG

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

By analyzing existing cross correlation between Allianz SE and adidas AG, you can compare the effects of market volatilities on Allianz SE and Adidas AG 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 Allianz SE with a short position of Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allianz SE and Adidas AG.

Diversification Opportunities for Allianz SE and Adidas AG

0.59

Correlation Coefficient

Allianz SE  Adidas AG

Very weak diversification

The 3 months correlation between Allianz and Adidas is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Allianz SE and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG and Allianz SE 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 Allianz SE are associated (or correlated) with Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of Allianz SE i.e., Allianz SE and Adidas AG go up and down completely randomly.

Pair Corralation between Allianz SE and Adidas AG

Assuming the 90 days horizon Allianz SE is expected to under-perform the Adidas AG. But the stock apears to be less risky and, when comparing its historical volatility, Allianz SE is 2.31 times less risky than Adidas AG. The stock trades about -0.01 of its potential returns per unit of risk. The adidas AG is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  23,870  in adidas AG on September 27, 2024 and sell it today you would lose (260.00) from holding adidas AG or give up 1.09% of portfolio value over 90 days.

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

Allianz SE  vs.  adidas AG

Allianz SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allianz SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Allianz SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

adidas AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days adidas AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Adidas AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Allianz SE and Adidas AG

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

The idea behind Allianz SE and adidas AG 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 CEOs Directory module to screen CEOs from public companies around the world.