Correlation Between Wolverine World and Adidas AG

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

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

Diversification Opportunities for Wolverine World and Adidas AG

-0.3

Correlation Coefficient

Wolverine World  Adidas AG

Very good diversification

The 3 months correlation between Wolverine and Adidas is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Wolverine World Wide and Adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adidas AG and Wolverine World 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 Wolverine World Wide 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 Wolverine World i.e., Wolverine World and Adidas AG go up and down completely randomly.

Pair Corralation between Wolverine World and Adidas AG

Considering the 90-day investment horizon Wolverine World Wide is expected to under-perform the Adidas AG. In addition to that, Wolverine World is 2.47 times more volatile than Adidas AG. It trades about -0.44 of its total potential returns per unit of risk. Adidas AG is currently generating about -0.09 per unit of volatility. If you would invest  26,552  in Adidas AG on November 29, 2024 and sell it today you would lose (979.00) from holding Adidas AG or give up 3.69% of portfolio value over 90 days.

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

Wolverine World Wide  vs.  Adidas AG

Wolverine World Wide

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wolverine World Wide has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Adidas AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adidas AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Adidas AG may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Wolverine World and Adidas AG

The main advantage of trading using opposite Wolverine World and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wolverine World 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 Wolverine World Wide 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.