Correlation Between Adobe Systems and New Relic

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

Diversification Opportunities for Adobe Systems and New Relic

0.19

Correlation Coefficient

Adobe Systems  New Relic

Average diversification

The 3 months correlation between Adobe and New is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Systems Incorporated and New Relic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Relic 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 New Relic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Relic has no effect on the direction of Adobe Systems i.e., Adobe Systems and New Relic go up and down completely randomly.

Pair Corralation between Adobe Systems and New Relic

If you would invest  7,164  in New Relic on September 2, 2024 and sell it today you would earn a total of  0.00  from holding New Relic or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Adobe Systems Incorporated  vs.  New Relic

Adobe Systems

Risk-Adjusted Performance

0 of 100

Very Weak

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 latest unsteady performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

New Relic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Relic has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, New Relic is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Adobe Systems and New Relic

The main advantage of trading using opposite Adobe Systems and New Relic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adobe Systems position performs unexpectedly, New Relic 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 New Relic will offset losses from the drop in New Relic's long position.

The idea behind Adobe Systems Incorporated and New Relic 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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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 Transaction History module to view history of all your transactions and understand their impact on performance.