Correlation Between Adidas AG and Asics Corp
Can any of the company-specific risk be diversified away by investing in both Adidas AG and Asics Corp 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 Asics Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adidas AG ADR and Asics Corp ADR, you can compare the effects of market volatilities on Adidas AG and Asics Corp 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 Asics Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adidas AG and Asics Corp.
Diversification Opportunities for Adidas AG and Asics Corp
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adidas and Asics is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Adidas AG ADR and Asics Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asics Corp ADR 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 ADR are associated (or correlated) with Asics Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asics Corp ADR has no effect on the direction of Adidas AG i.e., Adidas AG and Asics Corp go up and down completely randomly.
Pair Corralation between Adidas AG and Asics Corp
Assuming the 90 days horizon Adidas AG ADR is expected to under-perform the Asics Corp. But the otc stock apears to be less risky and, when comparing its historical volatility, Adidas AG ADR is 1.07 times less risky than Asics Corp. The otc stock trades about -0.06 of its potential returns per unit of risk. The Asics Corp ADR is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,730 in Asics Corp ADR on August 28, 2024 and sell it today you would earn a total of 223.00 from holding Asics Corp ADR or generate 12.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adidas AG ADR vs. Asics Corp ADR
Performance |
| Timeline |
| Adidas AG ADR |
| Asics Corp ADR |
Adidas AG and Asics Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adidas AG and Asics Corp
The main advantage of trading using opposite Adidas AG and Asics Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adidas AG position performs unexpectedly, Asics Corp 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 Asics Corp will offset losses from the drop in Asics Corp's long position.| Adidas AG vs. ASICS | Adidas AG vs. Asics Corp ADR | Adidas AG vs. American Rebel Holdings | Adidas AG vs. American Rebel Holdings |
| Asics Corp vs. American Rebel Holdings | Asics Corp vs. American Rebel Holdings | Asics Corp vs. Crocs Inc | Asics Corp vs. On Holding |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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