Correlation Between Square and Adobe
Can any of the company-specific risk be diversified away by investing in both Square 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 Square and Adobe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Square Inc and Adobe Inc, you can compare the effects of market volatilities on Square 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 Square with a short position of Adobe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Square and Adobe.
Diversification Opportunities for Square and Adobe
Weak diversification
The 3 months correlation between Square and Adobe is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Square Inc and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc and Square 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 Square Inc 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 Square i.e., Square and Adobe go up and down completely randomly.
Pair Corralation between Square and Adobe
Assuming the 90 days horizon Square Inc is expected to under-perform the Adobe. In addition to that, Square is 1.96 times more volatile than Adobe Inc. It trades about -0.02 of its total potential returns per unit of risk. Adobe Inc is currently generating about 0.12 per unit of volatility. If you would invest 40,770 in Adobe Inc on November 9, 2024 and sell it today you would earn a total of 1,410 from holding Adobe Inc or generate 3.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Square Inc vs. Adobe Inc
Performance |
| Timeline |
| Square Inc |
| Adobe Inc |
Square and Adobe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Square and Adobe
The main advantage of trading using opposite Square and Adobe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Square 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.| Square vs. Shopify | Square vs. BYD Company Limited | Square vs. PayPal Holdings | Square vs. Palantir Technologies |
| Adobe vs. DXC Technology Co | Adobe vs. THORNEY TECHS LTD | Adobe vs. Firan Technology Group | Adobe vs. AAC TECHNOLOGHLDGADR |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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