Correlation Between VirTra and Adobe Systems

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

By analyzing existing cross correlation between VirTra Inc and Adobe Systems Incorporated, you can compare the effects of market volatilities on VirTra and Adobe Systems 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 VirTra with a short position of Adobe Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of VirTra and Adobe Systems.

Diversification Opportunities for VirTra and Adobe Systems

0.66

Correlation Coefficient

VirTra  Adobe Systems

Poor diversification

The 3 months correlation between VirTra and Adobe is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding VirTra Inc and Adobe Systems Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Systems and VirTra 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 VirTra Inc are associated (or correlated) with Adobe Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Systems has no effect on the direction of VirTra i.e., VirTra and Adobe Systems go up and down completely randomly.

Pair Corralation between VirTra and Adobe Systems

Given the investment horizon of 90 days VirTra Inc is expected to under-perform the Adobe Systems. In addition to that, VirTra is 1.38 times more volatile than Adobe Systems Incorporated. It trades about -0.19 of its total potential returns per unit of risk. Adobe Systems Incorporated is currently generating about -0.08 per unit of volatility. If you would invest  40,850  in Adobe Systems Incorporated on January 11, 2025 and sell it today you would lose (5,603) from holding Adobe Systems Incorporated or give up 13.72% of portfolio value over 90 days.

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

VirTra Inc  vs.  Adobe Systems Incorporated

VirTra Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days VirTra Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Adobe Systems

Risk-Adjusted Performance

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.

Pair Trading with VirTra and Adobe Systems

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

The idea behind VirTra Inc and Adobe Systems Incorporated 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.