Correlation Between Ams AG and Roche Holding

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

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

Diversification Opportunities for Ams AG and Roche Holding

0.72

Correlation Coefficient

Ams AG  Roche Holding

Poor diversification

The 3 months correlation between Ams and Roche is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ams AG and Roche Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding AG and Ams 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 Ams AG are associated (or correlated) with Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding AG has no effect on the direction of Ams AG i.e., Ams AG and Roche Holding go up and down completely randomly.

Pair Corralation between Ams AG and Roche Holding

Assuming the 90 days trading horizon Ams AG is expected to under-perform the Roche Holding. In addition to that, Ams AG is 4.39 times more volatile than Roche Holding AG. It trades about -0.19 of its total potential returns per unit of risk. Roche Holding AG is currently generating about -0.17 per unit of volatility. If you would invest  28,770  in Roche Holding AG on September 2, 2024 and sell it today you would lose (3,220) from holding Roche Holding AG or give up 11.19% of portfolio value over 90 days.

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

Ams AG  vs.  Roche Holding AG

Ams AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ams AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Roche Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roche Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental 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 Ams AG and Roche Holding

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

The idea behind Ams AG and Roche 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.