Correlation Between Wex and Adyen NV

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

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

Diversification Opportunities for Wex and Adyen NV

0.68

Correlation Coefficient

Wex  Adyen NV

Poor diversification

The 3 months correlation between Wex and Adyen is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Wex Inc and Adyen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adyen NV and Wex 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 Wex Inc 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 Wex i.e., Wex and Adyen NV go up and down completely randomly.

Pair Corralation between Wex and Adyen NV

Considering the 90-day investment horizon Wex Inc is expected to generate 0.45 times more return on investment than Adyen NV. However, Wex Inc is 2.23 times less risky than Adyen NV. It trades about 0.05 of its potential returns per unit of risk. Adyen NV is currently generating about 0.02 per unit of risk. If you would invest  16,287  in Wex Inc on January 25, 2024 and sell it today you would earn a total of  7,115  from holding Wex Inc or generate 43.69% return on investment over 90 days.

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

Wex Inc  vs.  Adyen NV

Wex Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wex Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Wex showed solid returns over the last few months and may actually be approaching a breakup point.

Adyen NV

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adyen NV are ranked lower than 7 (%) 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 Wex and Adyen NV

The main advantage of trading using opposite Wex and Adyen NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wex 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 Wex Inc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.