Correlation Between Alfa Laval and Sonova Holding

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

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

Diversification Opportunities for Alfa Laval and Sonova Holding

0.31

Correlation Coefficient

Alfa Laval  Sonova Holding

Weak diversification

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

Pair Corralation between Alfa Laval and Sonova Holding

Assuming the 90 days horizon Alfa Laval AB is expected to generate 0.91 times more return on investment than Sonova Holding. However, Alfa Laval AB is 1.1 times less risky than Sonova Holding. It trades about 0.06 of its potential returns per unit of risk. Sonova Holding AG is currently generating about 0.05 per unit of risk. If you would invest  4,145  in Alfa Laval AB on September 5, 2024 and sell it today you would earn a total of  273.00  from holding Alfa Laval AB or generate 6.59% return on investment over 90 days.

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

Alfa Laval AB  vs.  Sonova Holding AG

Alfa Laval AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Laval AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Alfa Laval is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sonova Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonova Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sonova Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alfa Laval and Sonova Holding

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

The idea behind Alfa Laval AB and Sonova Holding 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.