Correlation Between Confluent and Adyen NV

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

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

Diversification Opportunities for Confluent and Adyen NV

-0.55

Correlation Coefficient

Confluent  Adyen NV

Excellent diversification

The 3 months correlation between Confluent and Adyen is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Confluent and Adyen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adyen NV and Confluent 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 Confluent are associated (or correlated) with Adyen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adyen NV has no effect on the direction of Confluent i.e., Confluent and Adyen NV go up and down completely randomly.

Pair Corralation between Confluent and Adyen NV

Given the investment horizon of 90 days Confluent is expected to generate 1.65 times more return on investment than Adyen NV. However, Confluent is 1.65 times more volatile than Adyen NV. It trades about 0.21 of its potential returns per unit of risk. Adyen NV is currently generating about 0.03 per unit of risk. If you would invest  2,037  in Confluent on September 3, 2024 and sell it today you would earn a total of  1,047  from holding Confluent or generate 51.4% return on investment over 90 days.

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

Confluent  vs.  Adyen NV

Confluent

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Confluent are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Confluent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Adyen NV

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Adyen NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Confluent and Adyen NV

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

The idea behind Confluent and Adyen NV 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.