Correlation Between Alcon AG and Regional Health

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

By analyzing existing cross correlation between Alcon AG and Regional Health Properties, you can compare the effects of market volatilities on Alcon AG and Regional Health 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 Regional Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcon AG and Regional Health.

Diversification Opportunities for Alcon AG and Regional Health

0.62

Correlation Coefficient

Alcon AG  Regional Health

Poor diversification

The 3 months correlation between Alcon and Regional is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alcon AG and Regional Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Health Prop 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 Regional Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Health Prop has no effect on the direction of Alcon AG i.e., Alcon AG and Regional Health go up and down completely randomly.

Pair Corralation between Alcon AG and Regional Health

Considering the 90-day investment horizon Alcon AG is expected to generate 23.92 times less return on investment than Regional Health. But when comparing it to its historical volatility, Alcon AG is 16.46 times less risky than Regional Health. It trades about 0.07 of its potential returns per unit of risk. Regional Health Properties is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  171.00  in Regional Health Properties on December 1, 2024 and sell it today you would earn a total of  61.00  from holding Regional Health Properties or generate 35.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.33%
Values	Daily Returns

Alcon AG  vs.  Regional Health Properties

Alcon AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alcon AG are ranked lower than 5 (%) 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.

Regional Health Prop

Risk-Adjusted Performance

OK

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical indicators, Regional Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcon AG and Regional Health

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

The idea behind Alcon AG and Regional Health Properties 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.