Correlation Between Adobe Systems and Arca Continental

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Can any of the company-specific risk be diversified away by investing in both Adobe Systems and Arca Continental 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 Arca Continental 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 Arca Continental SAB, you can compare the effects of market volatilities on Adobe Systems and Arca Continental 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 Arca Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adobe Systems and Arca Continental.

Diversification Opportunities for Adobe Systems and Arca Continental

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Adobe and EMBVF is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Systems Incorporated and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB 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 Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Adobe Systems i.e., Adobe Systems and Arca Continental go up and down completely randomly.

Pair Corralation between Adobe Systems and Arca Continental

Given the investment horizon of 90 days Adobe Systems Incorporated is expected to generate 1.12 times more return on investment than Arca Continental. However, Adobe Systems is 1.12 times more volatile than Arca Continental SAB. It trades about 0.29 of its potential returns per unit of risk. Arca Continental SAB is currently generating about 0.09 per unit of risk. If you would invest  28,575  in Adobe Systems Incorporated on September 5, 2022 and sell it today you would earn a total of  5,578  from holding Adobe Systems Incorporated or generate 19.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Adobe Systems Incorporated  vs.  Arca Continental SAB

 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

Arca Continental SAB 
EMBVF Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Arca Continental SAB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Arca Continental exhibited solid returns over the last few months and may actually be approaching a breakup point.

EMBVF Price Channel

Adobe Systems and Arca Continental Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Adobe Systems and Arca Continental

The main advantage of trading using opposite Adobe Systems and Arca Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adobe Systems position performs unexpectedly, Arca Continental 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 Arca Continental will offset losses from the drop in Arca Continental's long position.
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The idea behind Adobe Systems Incorporated and Arca Continental SAB 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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