Correlation Between Bread Financial and Adobe
Can any of the company-specific risk be diversified away by investing in both Bread Financial and Adobe 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 Bread Financial and Adobe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bread Financial Holdings and Adobe Inc, you can compare the effects of market volatilities on Bread Financial and Adobe 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 Bread Financial with a short position of Adobe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Adobe.
Diversification Opportunities for Bread Financial and Adobe
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bread and Adobe is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with Adobe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Inc has no effect on the direction of Bread Financial i.e., Bread Financial and Adobe go up and down completely randomly.
Pair Corralation between Bread Financial and Adobe
Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 1.2 times more return on investment than Adobe. However, Bread Financial is 1.2 times more volatile than Adobe Inc. It trades about 0.15 of its potential returns per unit of risk. Adobe Inc is currently generating about 0.01 per unit of risk. If you would invest 4,034 in Bread Financial Holdings on September 14, 2024 and sell it today you would earn a total of 5,836 from holding Bread Financial Holdings or generate 144.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.2% |
| Values | Daily Returns |
Bread Financial Holdings vs. Adobe Inc
Performance |
| Timeline |
| Bread Financial Holdings |
| Adobe Inc |
Bread Financial and Adobe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bread Financial and Adobe
The main advantage of trading using opposite Bread Financial and Adobe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial position performs unexpectedly, Adobe 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 will offset losses from the drop in Adobe's long position.| Bread Financial vs. Beyond Meat | Bread Financial vs. Zoom Video Communications | Bread Financial vs. Autohome | Bread Financial vs. STMicroelectronics NV |
| Adobe vs. GX AI TECH | Adobe vs. Verizon Communications | Adobe vs. Lupatech SA | Adobe vs. Bemobi Mobile Tech |
Check out your portfolio center.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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