Correlation Between ABB and Sonova H

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

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

Diversification Opportunities for ABB and Sonova H

0.41

Correlation Coefficient

ABB  Sonova H

Very weak diversification

The 3 months correlation between ABB and Sonova is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding ABB and Sonova H Ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonova H Ag and ABB 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 ABB are associated (or correlated) with Sonova H. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonova H Ag has no effect on the direction of ABB i.e., ABB and Sonova H go up and down completely randomly.

Pair Corralation between ABB and Sonova H

Assuming the 90 days trading horizon ABB is expected to generate 1.45 times more return on investment than Sonova H. However, ABB is 1.45 times more volatile than Sonova H Ag. It trades about -0.01 of its potential returns per unit of risk. Sonova H Ag is currently generating about -0.15 per unit of risk. If you would invest  4,954  in ABB on December 27, 2024 and sell it today you would lose (80.00) from holding ABB or give up 1.61% of portfolio value over 90 days.

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

ABB  vs.  Sonova H Ag

ABB

Risk-Adjusted Performance

Very Weak

Over the last 90 days ABB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ABB is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sonova H Ag

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonova H Ag has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with ABB and Sonova H

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

The idea behind ABB and Sonova H Ag 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..