Correlation Between Adidas AG and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Adidas AG and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between adidas AG and Dow Jones Industrial, you can compare the effects of market volatilities on Adidas AG and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adidas AG and Dow Jones.
Diversification Opportunities for Adidas AG and Dow Jones
Good diversification
The 3 months correlation between Adidas and Dow is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding adidas AG and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Adidas AG i.e., Adidas AG and Dow Jones go up and down completely randomly.
Pair Corralation between Adidas AG and Dow Jones
Assuming the 90 days horizon adidas AG is expected to generate 2.69 times more return on investment than Dow Jones. However, Adidas AG is 2.69 times more volatile than Dow Jones Industrial. It trades about 0.07 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 12,207 in adidas AG on September 3, 2024 and sell it today you would earn a total of 10,093 from holding adidas AG or generate 82.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.02% |
| Values | Daily Returns |
adidas AG vs. Dow Jones Industrial
Performance |
| Timeline |
Adidas AG and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
adidas AG
Pair trading matchups for Adidas AG
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Adidas AG and Dow Jones
The main advantage of trading using opposite Adidas AG and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adidas AG position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Adidas AG vs. SAP SE | Adidas AG vs. Siemens Aktiengesellschaft | Adidas AG vs. Allianz SE | Adidas AG vs. BASF SE |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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