Correlation Between Alfi and Adobe Systems

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

Diversification Opportunities for Alfi and Adobe Systems

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Alfi and Adobe is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Alfi Inc and Adobe Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Systems and Alfi 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 Alfi Inc are associated (or correlated) with Adobe Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Systems has no effect on the direction of Alfi i.e., Alfi and Adobe Systems go up and down completely randomly.

Pair Corralation between Alfi and Adobe Systems

Considering the 90-day investment horizon Alfi Inc is expected to generate 5.22 times more return on investment than Adobe Systems. However, Alfi is 5.22 times more volatile than Adobe Systems. It trades about 0.02 of its potential returns per unit of risk. Adobe Systems is currently generating about 0.0 per unit of risk. If you would invest  290.00  in Alfi Inc on April 6, 2022 and sell it today you would lose (170.00)  from holding Alfi Inc or give up 58.62% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy59.36%
ValuesDaily Returns

Alfi Inc  vs.  Adobe Systems

 Performance (%) 
      Timeline 
Alfi Inc 
Alfi Performance
0 of 100
Over the last 90 days Alfi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in August 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Alfi Price Channel

Adobe Systems 
Adobe Performance
0 of 100
Over the last 90 days Adobe Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in August 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Adobe Price Channel

Alfi and Adobe Systems Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Alfi and Adobe Systems

The main advantage of trading using opposite Alfi and Adobe Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfi position performs unexpectedly, Adobe Systems 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 Systems will offset losses from the drop in Adobe Systems' long position.
The idea behind Alfi Inc and Adobe Systems 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.
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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