Correlation Between Frey SA and Adomos SA

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

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

Diversification Opportunities for Frey SA and Adomos SA

0.24

Correlation Coefficient

Frey SA  Adomos SA

Modest diversification

The 3 months correlation between Frey and Adomos is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Frey SA and Adomos SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adomos SA and Frey SA 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 Frey SA are associated (or correlated) with Adomos SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adomos SA has no effect on the direction of Frey SA i.e., Frey SA and Adomos SA go up and down completely randomly.

Pair Corralation between Frey SA and Adomos SA

Assuming the 90 days trading horizon Frey SA is expected to under-perform the Adomos SA. But the stock apears to be less risky and, when comparing its historical volatility, Frey SA is 342.34 times less risky than Adomos SA. The stock trades about -0.1 of its potential returns per unit of risk. The Adomos SA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Adomos SA on December 22, 2024 and sell it today you would lose (83.00) from holding Adomos SA or give up 83.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.55%
Values	Daily Returns

Frey SA  vs.  Adomos SA

Frey SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frey SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Frey SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Adomos SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adomos SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Adomos SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frey SA and Adomos SA

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

The idea behind Frey SA and Adomos SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.