Correlation Between Adidas AG and SHIMANO INC

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

By analyzing existing cross correlation between adidas AG and SHIMANO INC UNSPADR10, you can compare the effects of market volatilities on Adidas AG and SHIMANO INC 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 Adidas AG with a short position of SHIMANO INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adidas AG and SHIMANO INC.

Diversification Opportunities for Adidas AG and SHIMANO INC

0.89

Correlation Coefficient

Adidas AG  SHIMANO INC

Very poor diversification

The 3 months correlation between Adidas and SHIMANO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding adidas AG and SHIMANO INC UNSPADR10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIMANO INC UNSPADR10 and Adidas AG 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 adidas AG are associated (or correlated) with SHIMANO INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIMANO INC UNSPADR10 has no effect on the direction of Adidas AG i.e., Adidas AG and SHIMANO INC go up and down completely randomly.

Pair Corralation between Adidas AG and SHIMANO INC

Assuming the 90 days trading horizon adidas AG is expected to generate 0.9 times more return on investment than SHIMANO INC. However, adidas AG is 1.11 times less risky than SHIMANO INC. It trades about 0.16 of its potential returns per unit of risk. SHIMANO INC UNSPADR10 is currently generating about 0.14 per unit of risk. If you would invest  19,933  in adidas AG on March 16, 2024 and sell it today you would earn a total of  3,007  from holding adidas AG or generate 15.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

adidas AG  vs.  SHIMANO INC UNSPADR10

adidas AG

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in adidas AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Adidas AG unveiled solid returns over the last few months and may actually be approaching a breakup point.

SHIMANO INC UNSPADR10

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SHIMANO INC UNSPADR10 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, SHIMANO INC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adidas AG and SHIMANO INC

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

The idea behind adidas AG and SHIMANO INC UNSPADR10 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.