Correlation Between Confluent and Adyen NV

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

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

Diversification Opportunities for Confluent and Adyen NV

-0.49

Correlation Coefficient

Confluent  Adyen NV

Very good diversification

The 3 months correlation between Confluent and Adyen is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Confluent and Adyen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adyen NV and Confluent 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 Confluent are associated (or correlated) with Adyen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adyen NV has no effect on the direction of Confluent i.e., Confluent and Adyen NV go up and down completely randomly.

Pair Corralation between Confluent and Adyen NV

Given the investment horizon of 90 days Confluent is expected to under-perform the Adyen NV. But the stock apears to be less risky and, when comparing its historical volatility, Confluent is 1.05 times less risky than Adyen NV. The stock trades about -0.08 of its potential returns per unit of risk. The Adyen NV is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  164,350  in Adyen NV on June 23, 2024 and sell it today you would lose (13,550) from holding Adyen NV or give up 8.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Confluent  vs.  Adyen NV

Confluent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Confluent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in October 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Adyen NV

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adyen NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Adyen NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Confluent and Adyen NV

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

The idea behind Confluent and Adyen NV 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.