Correlation Between US Bancorp and Adobe

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

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

Diversification Opportunities for US Bancorp and Adobe

0.15

Correlation Coefficient

US Bancorp  Adobe

Average diversification

The 3 months correlation between USB and Adobe is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc and US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and Adobe go up and down completely randomly.

Pair Corralation between US Bancorp and Adobe

Assuming the 90 days trading horizon US Bancorp is expected to generate 1.07 times less return on investment than Adobe. In addition to that, US Bancorp is 1.03 times more volatile than Adobe Inc. It trades about 0.03 of its total potential returns per unit of risk. Adobe Inc is currently generating about 0.03 per unit of volatility. If you would invest  722,600  in Adobe Inc on September 29, 2024 and sell it today you would earn a total of  182,500  from holding Adobe Inc or generate 25.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

US Bancorp  vs.  Adobe Inc

US Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, US Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Adobe Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with US Bancorp and Adobe

The main advantage of trading using opposite US Bancorp and Adobe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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 US Bancorp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.