Correlation Between Information Services and Adidas AG

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

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

Diversification Opportunities for Information Services and Adidas AG

-0.03

Correlation Coefficient

Information Services  Adidas AG

Good diversification

The 3 months correlation between Information and Adidas is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Information Services Internati and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG and Information Services 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 Information Services International Dentsu 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 Information Services i.e., Information Services and Adidas AG go up and down completely randomly.

Pair Corralation between Information Services and Adidas AG

Assuming the 90 days horizon Information Services International Dentsu is expected to generate 1.16 times more return on investment than Adidas AG. However, Information Services is 1.16 times more volatile than adidas AG. It trades about 0.07 of its potential returns per unit of risk. adidas AG is currently generating about -0.05 per unit of risk. If you would invest  3,580  in Information Services International Dentsu on December 23, 2024 and sell it today you would earn a total of  260.00  from holding Information Services International Dentsu or generate 7.26% return on investment over 90 days.

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

Information Services Internati  vs.  adidas AG

Information Services

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services International Dentsu are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Information Services may actually be approaching a critical reversion point that can send shares even higher in April 2025.

adidas AG

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Information Services and Adidas AG

The main advantage of trading using opposite Information Services and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Services 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 Information Services International Dentsu 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.