Correlation Between New Relic and Adobe Systems

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

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

Diversification Opportunities for New Relic and Adobe Systems

-0.87

Correlation Coefficient

New Relic  Adobe Systems

Pay attention - limited upside

The 3 months correlation between New and Adobe is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding New Relic and Adobe Systems Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Systems rporated and New Relic 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 New Relic are associated (or correlated) with Adobe Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Systems rporated has no effect on the direction of New Relic i.e., New Relic and Adobe Systems go up and down completely randomly.

Pair Corralation between New Relic and Adobe Systems

If you would invest  8,699  in New Relic on January 24, 2024 and sell it today you would earn a total of  0.00  from holding New Relic or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

New Relic  vs.  Adobe Systems Incorporated

New Relic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Relic has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, New Relic is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Adobe Systems rporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Systems Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with New Relic and Adobe Systems

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

The idea behind New Relic and Adobe Systems Incorporated 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.