Correlation Between Adobe Systems and SentinelOne

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

Diversification Opportunities for Adobe Systems and SentinelOne

0.86

Correlation Coefficient

Adobe Systems  SentinelOne

Very poor diversification

The 3 months correlation between Adobe and SentinelOne is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Systems Incorporated and SentinelOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SentinelOne 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 SentinelOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SentinelOne has no effect on the direction of Adobe Systems i.e., Adobe Systems and SentinelOne go up and down completely randomly.

Pair Corralation between Adobe Systems and SentinelOne

Given the investment horizon of 90 days Adobe Systems Incorporated is expected to generate 0.47 times more return on investment than SentinelOne. However, Adobe Systems Incorporated is 2.14 times less risky than SentinelOne. It trades about -0.22 of its potential returns per unit of risk. SentinelOne is currently generating about -0.12 per unit of risk. If you would invest  50,209  in Adobe Systems Incorporated on January 30, 2024 and sell it today you would lose (2,506) from holding Adobe Systems Incorporated or give up 4.99% of portfolio value over 90 days.

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

Adobe Systems Incorporated  vs.  SentinelOne

Adobe Systems rporated

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 unsteady performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SentinelOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Adobe Systems and SentinelOne

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

The idea behind Adobe Systems Incorporated and SentinelOne 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.