Correlation Between Koninklijke Philips and Adyen NV

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

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

Diversification Opportunities for Koninklijke Philips and Adyen NV

0.06

Correlation Coefficient

Koninklijke Philips  Adyen NV

Significant diversification

The 3 months correlation between Koninklijke and Adyen is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and Adyen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adyen NV and Koninklijke Philips 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 Koninklijke Philips NV 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 Koninklijke Philips i.e., Koninklijke Philips and Adyen NV go up and down completely randomly.

Pair Corralation between Koninklijke Philips and Adyen NV

Assuming the 90 days trading horizon Koninklijke Philips NV is expected to under-perform the Adyen NV. But the stock apears to be less risky and, when comparing its historical volatility, Koninklijke Philips NV is 1.83 times less risky than Adyen NV. The stock trades about 0.0 of its potential returns per unit of risk. The Adyen NV is currently generating about 0.52 of returns per unit of risk over similar time horizon. If you would invest  123,840  in Adyen NV on September 17, 2024 and sell it today you would earn a total of  25,180  from holding Adyen NV or generate 20.33% return on investment over 90 days.

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

Koninklijke Philips NV  vs.  Adyen NV

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Adyen NV

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adyen NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Adyen NV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Koninklijke Philips and Adyen NV

The main advantage of trading using opposite Koninklijke Philips and Adyen NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Philips 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 Koninklijke Philips NV 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.