Correlation Between Alcon AG and Becton Dickinson

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

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

Diversification Opportunities for Alcon AG and Becton Dickinson

0.31

Correlation Coefficient

Alcon AG  Becton Dickinson

Weak diversification

The 3 months correlation between Alcon and Becton is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Alcon AG and Becton Dickinson and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Becton Dickinson and Alcon AG 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 Alcon AG are associated (or correlated) with Becton Dickinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Becton Dickinson has no effect on the direction of Alcon AG i.e., Alcon AG and Becton Dickinson go up and down completely randomly.

Pair Corralation between Alcon AG and Becton Dickinson

Considering the 90-day investment horizon Alcon AG is expected to generate 1.2 times less return on investment than Becton Dickinson. But when comparing it to its historical volatility, Alcon AG is 1.09 times less risky than Becton Dickinson. It trades about 0.04 of its potential returns per unit of risk. Becton Dickinson and is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  22,085  in Becton Dickinson and on November 29, 2024 and sell it today you would earn a total of  674.00  from holding Becton Dickinson and or generate 3.05% return on investment over 90 days.

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

Alcon AG  vs.  Becton Dickinson and

Alcon AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alcon AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Alcon AG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Becton Dickinson

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Becton Dickinson and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Becton Dickinson is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcon AG and Becton Dickinson

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

The idea behind Alcon AG and Becton Dickinson and 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.