Correlation Between Adobe Systems and BlackBerry

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Can any of the company-specific risk be diversified away by investing in both Adobe Systems and BlackBerry 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 Adobe Systems and BlackBerry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adobe Systems Incorporated and BlackBerry, you can compare the effects of market volatilities on Adobe Systems and BlackBerry 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 Adobe Systems with a short position of BlackBerry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adobe Systems and BlackBerry.

Diversification Opportunities for Adobe Systems and BlackBerry

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Adobe and BlackBerry is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Systems Incorporated and BlackBerry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackBerry and Adobe Systems 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 Adobe Systems Incorporated are associated (or correlated) with BlackBerry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackBerry has no effect on the direction of Adobe Systems i.e., Adobe Systems and BlackBerry go up and down completely randomly.

Pair Corralation between Adobe Systems and BlackBerry

Given the investment horizon of 90 days Adobe Systems Incorporated is expected to generate 1.1 times more return on investment than BlackBerry. However, Adobe Systems is 1.1 times more volatile than BlackBerry. It trades about -0.02 of its potential returns per unit of risk. BlackBerry is currently generating about -0.02 per unit of risk. If you would invest  36,830  in Adobe Systems Incorporated on September 5, 2022 and sell it today you would lose (2,677)  from holding Adobe Systems Incorporated or give up 7.27% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Adobe Systems Incorporated  vs.  BlackBerry

 Performance (%) 
       Timeline  
Adobe Systems Incorp 
Adobe Performance
0 of 100
Over the last 90 days Adobe Systems Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Adobe Systems is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Adobe Price Channel

BlackBerry 
BlackBerry Performance
0 of 100
Over the last 90 days BlackBerry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, BlackBerry is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

BlackBerry Price Channel

Adobe Systems and BlackBerry Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Adobe Systems and BlackBerry

The main advantage of trading using opposite Adobe Systems and BlackBerry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adobe Systems position performs unexpectedly, BlackBerry 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 BlackBerry will offset losses from the drop in BlackBerry's long position.
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The idea behind Adobe Systems Incorporated and BlackBerry 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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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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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