Correlation Between CeoTronics and Adidas AG

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

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

Diversification Opportunities for CeoTronics and Adidas AG

0.71

Correlation Coefficient

CeoTronics  Adidas AG

Poor diversification

The 3 months correlation between CeoTronics and Adidas is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding CeoTronics AG and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG and CeoTronics 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 CeoTronics AG 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 CeoTronics i.e., CeoTronics and Adidas AG go up and down completely randomly.

Pair Corralation between CeoTronics and Adidas AG

Assuming the 90 days trading horizon CeoTronics AG is expected to generate 1.83 times more return on investment than Adidas AG. However, CeoTronics is 1.83 times more volatile than adidas AG. It trades about 0.09 of its potential returns per unit of risk. adidas AG is currently generating about 0.14 per unit of risk. If you would invest  530.00  in CeoTronics AG on October 23, 2024 and sell it today you would earn a total of  75.00  from holding CeoTronics AG or generate 14.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

CeoTronics AG  vs.  adidas AG

CeoTronics AG

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CeoTronics AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, CeoTronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

adidas AG

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in adidas AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Adidas AG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CeoTronics and Adidas AG

The main advantage of trading using opposite CeoTronics and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CeoTronics 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 CeoTronics AG 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.