Correlation Between Adobe Systems and Pagaya Technologies

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

Diversification Opportunities for Adobe Systems and Pagaya Technologies

0.29

Correlation Coefficient

Adobe Systems  Pagaya Technologies

Modest diversification

The 3 months correlation between Adobe and Pagaya is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Systems Incorporated and Pagaya Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pagaya Technologies 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 Pagaya Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pagaya Technologies has no effect on the direction of Adobe Systems i.e., Adobe Systems and Pagaya Technologies go up and down completely randomly.

Pair Corralation between Adobe Systems and Pagaya Technologies

Given the investment horizon of 90 days Adobe Systems Incorporated is expected to under-perform the Pagaya Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Adobe Systems Incorporated is 3.76 times less risky than Pagaya Technologies. The stock trades about -0.07 of its potential returns per unit of risk. The Pagaya Technologies is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,257  in Pagaya Technologies on September 5, 2024 and sell it today you would lose (226.00) from holding Pagaya Technologies or give up 17.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Adobe Systems Incorporated  vs.  Pagaya Technologies

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 weak 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.

Pagaya Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pagaya Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Pagaya Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Adobe Systems and Pagaya Technologies

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

The idea behind Adobe Systems Incorporated and Pagaya Technologies 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 the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.