Correlation Between Gen Digital and Adobe

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

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

Diversification Opportunities for Gen Digital and Adobe

0.52

Correlation Coefficient

Gen Digital  Adobe

Very weak diversification

The 3 months correlation between Gen and Adobe is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Gen Digital and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc and Gen Digital 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 Gen Digital are associated (or correlated) with Adobe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Inc has no effect on the direction of Gen Digital i.e., Gen Digital and Adobe go up and down completely randomly.

Pair Corralation between Gen Digital and Adobe

Assuming the 90 days trading horizon Gen Digital is expected to generate 1.13 times less return on investment than Adobe. But when comparing it to its historical volatility, Gen Digital is 1.12 times less risky than Adobe. It trades about 0.05 of its potential returns per unit of risk. Adobe Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,592  in Adobe Inc on October 4, 2024 and sell it today you would earn a total of  2,020  from holding Adobe Inc or generate 56.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.99%
Values	Daily Returns

Gen Digital  vs.  Adobe Inc

Gen Digital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gen Digital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Gen Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Adobe Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Adobe Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Adobe is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gen Digital and Adobe

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

The idea behind Gen Digital and Adobe Inc 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.