Correlation Between UmweltBank and Adidas AG

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

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

Diversification Opportunities for UmweltBank and Adidas AG

0.42

Correlation Coefficient

UmweltBank  Adidas AG

Very weak diversification

The 3 months correlation between UmweltBank and Adidas is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding UmweltBank AG and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG and UmweltBank 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 UmweltBank AG 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 UmweltBank i.e., UmweltBank and Adidas AG go up and down completely randomly.

Pair Corralation between UmweltBank and Adidas AG

Assuming the 90 days trading horizon UmweltBank AG is expected to under-perform the Adidas AG. But the stock apears to be less risky and, when comparing its historical volatility, UmweltBank AG is 1.09 times less risky than Adidas AG. The stock trades about -0.19 of its potential returns per unit of risk. The adidas AG is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  11,700  in adidas AG on December 24, 2024 and sell it today you would lose (800.00) from holding adidas AG or give up 6.84% of portfolio value over 90 days.

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

UmweltBank AG  vs.  adidas AG

UmweltBank AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days UmweltBank AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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. In spite of comparatively stable basic indicators, Adidas AG is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with UmweltBank and Adidas AG

The main advantage of trading using opposite UmweltBank and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UmweltBank 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 UmweltBank AG 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.