Correlation Between Adler Group and Aroundtown

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

By analyzing existing cross correlation between Adler Group SA and Aroundtown SA, you can compare the effects of market volatilities on Adler Group and Aroundtown 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 Adler Group with a short position of Aroundtown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adler Group and Aroundtown.

Diversification Opportunities for Adler Group and Aroundtown

0.14

Correlation Coefficient

Adler Group  Aroundtown

Average diversification

The 3 months correlation between Adler and Aroundtown is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Adler Group SA and Aroundtown SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aroundtown SA and Adler Group 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 Adler Group SA are associated (or correlated) with Aroundtown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aroundtown SA has no effect on the direction of Adler Group i.e., Adler Group and Aroundtown go up and down completely randomly.

Pair Corralation between Adler Group and Aroundtown

Assuming the 90 days horizon Adler Group SA is expected to generate 1.42 times more return on investment than Aroundtown. However, Adler Group is 1.42 times more volatile than Aroundtown SA. It trades about 0.13 of its potential returns per unit of risk. Aroundtown SA is currently generating about 0.08 per unit of risk. If you would invest  27.00  in Adler Group SA on September 12, 2024 and sell it today you would earn a total of  8.00  from holding Adler Group SA or generate 29.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Adler Group SA  vs.  Aroundtown SA

Adler Group SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adler Group SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Adler Group reported solid returns over the last few months and may actually be approaching a breakup point.

Aroundtown SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aroundtown SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Aroundtown reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adler Group and Aroundtown

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

The idea behind Adler Group SA and Aroundtown SA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.