Correlation Between Adidas AG and Levi Strauss

Can any of the company-specific risk be diversified away by investing in both Adidas AG and Levi Strauss 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 Adidas AG and Levi Strauss into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adidas AG and Levi Strauss Co, you can compare the effects of market volatilities on Adidas AG and Levi Strauss 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 Adidas AG with a short position of Levi Strauss. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adidas AG and Levi Strauss.

Diversification Opportunities for Adidas AG and Levi Strauss

0.72

Correlation Coefficient

Adidas AG  Levi Strauss

Poor diversification

The 3 months correlation between Adidas and Levi is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Adidas AG and Levi Strauss Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Levi Strauss and Adidas AG 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 Adidas AG are associated (or correlated) with Levi Strauss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Levi Strauss has no effect on the direction of Adidas AG i.e., Adidas AG and Levi Strauss go up and down completely randomly.

Pair Corralation between Adidas AG and Levi Strauss

Assuming the 90 days horizon Adidas AG is expected to generate 1.45 times more return on investment than Levi Strauss. However, Adidas AG is 1.45 times more volatile than Levi Strauss Co. It trades about 0.04 of its potential returns per unit of risk. Levi Strauss Co is currently generating about -0.08 per unit of risk. If you would invest  24,342  in Adidas AG on September 15, 2024 and sell it today you would earn a total of  1,140  from holding Adidas AG or generate 4.68% return on investment over 90 days.

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

Adidas AG  vs.  Levi Strauss Co

Adidas AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adidas AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, Adidas AG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Levi Strauss

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Adidas AG and Levi Strauss

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

The idea behind Adidas AG and Levi Strauss Co 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.