Correlation Between Adyen NV and Koninklijke Philips

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

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

Diversification Opportunities for Adyen NV and Koninklijke Philips

0.11

Correlation Coefficient

Adyen NV  Koninklijke Philips

Average diversification

The 3 months correlation between Adyen and Koninklijke is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Adyen NV and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips and Adyen NV 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 Adyen NV are associated (or correlated) with Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Adyen NV i.e., Adyen NV and Koninklijke Philips go up and down completely randomly.

Pair Corralation between Adyen NV and Koninklijke Philips

Assuming the 90 days trading horizon Adyen NV is expected to generate 0.79 times more return on investment than Koninklijke Philips. However, Adyen NV is 1.26 times less risky than Koninklijke Philips. It trades about 0.12 of its potential returns per unit of risk. Koninklijke Philips NV is currently generating about -0.06 per unit of risk. If you would invest  131,200  in Adyen NV on September 13, 2024 and sell it today you would earn a total of  19,120  from holding Adyen NV or generate 14.57% return on investment over 90 days.

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

Adyen NV  vs.  Koninklijke Philips NV

Adyen NV

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adyen NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Adyen NV sustained solid returns over the last few months and may actually be approaching a breakup point.

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Adyen NV and Koninklijke Philips

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

The idea behind Adyen NV and Koninklijke Philips NV 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.