Correlation Between ABACUS STORAGE and Cochlear

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

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

Diversification Opportunities for ABACUS STORAGE and Cochlear

-0.64

Correlation Coefficient

ABACUS STORAGE  Cochlear

Excellent diversification

The 3 months correlation between ABACUS and Cochlear is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding ABACUS STORAGE KING and Cochlear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cochlear and ABACUS STORAGE 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 ABACUS STORAGE KING are associated (or correlated) with Cochlear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cochlear has no effect on the direction of ABACUS STORAGE i.e., ABACUS STORAGE and Cochlear go up and down completely randomly.

Pair Corralation between ABACUS STORAGE and Cochlear

Assuming the 90 days trading horizon ABACUS STORAGE KING is expected to generate 38.73 times more return on investment than Cochlear. However, ABACUS STORAGE is 38.73 times more volatile than Cochlear. It trades about 0.05 of its potential returns per unit of risk. Cochlear is currently generating about 0.06 per unit of risk. If you would invest  128.00  in ABACUS STORAGE KING on September 4, 2024 and sell it today you would lose (7.00) from holding ABACUS STORAGE KING or give up 5.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	68.74%
Values	Daily Returns

ABACUS STORAGE KING  vs.  Cochlear

ABACUS STORAGE KING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABACUS STORAGE KING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, ABACUS STORAGE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Cochlear

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cochlear are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, Cochlear is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ABACUS STORAGE and Cochlear

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

The idea behind ABACUS STORAGE KING and Cochlear 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.