Correlation Between Kering SA and Adidas AG
Can any of the company-specific risk be diversified away by investing in both Kering SA 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 Kering SA and Adidas AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kering SA and adidas AG, you can compare the effects of market volatilities on Kering SA 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 Kering SA with a short position of Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kering SA and Adidas AG.
Diversification Opportunities for Kering SA and Adidas AG
Very weak diversification
The 3 months correlation between Kering and Adidas is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kering SA and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG and Kering 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 Kering SA 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 Kering SA i.e., Kering SA and Adidas AG go up and down completely randomly.
Pair Corralation between Kering SA and Adidas AG
Assuming the 90 days horizon Kering SA is expected to generate 1.51 times less return on investment than Adidas AG. In addition to that, Kering SA is 1.11 times more volatile than adidas AG. It trades about 0.16 of its total potential returns per unit of risk. adidas AG is currently generating about 0.27 per unit of volatility. If you would invest 10,600 in adidas AG on September 25, 2024 and sell it today you would earn a total of 1,100 from holding adidas AG or generate 10.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Kering SA vs. adidas AG
Performance |
Timeline |
Kering SA |
adidas AG |
Kering SA and Adidas AG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Kering SA and Adidas AG
The main advantage of trading using opposite Kering SA and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kering SA 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.Kering SA vs. PARKEN Sport Entertainment | Kering SA vs. USWE SPORTS AB | Kering SA vs. REVO INSURANCE SPA | Kering SA vs. Transport International Holdings |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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