Correlation Between CochLear and Brambles

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

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

Diversification Opportunities for CochLear and Brambles

-0.75

Correlation Coefficient

CochLear  Brambles

Pay attention - limited upside

The 3 months correlation between CochLear and Brambles is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding CochLear Ltd ADR and Brambles Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brambles ADR and CochLear 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 CochLear Ltd ADR are associated (or correlated) with Brambles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brambles ADR has no effect on the direction of CochLear i.e., CochLear and Brambles go up and down completely randomly.

Pair Corralation between CochLear and Brambles

Assuming the 90 days horizon CochLear Ltd ADR is expected to under-perform the Brambles. In addition to that, CochLear is 1.92 times more volatile than Brambles Ltd ADR. It trades about -0.03 of its total potential returns per unit of risk. Brambles Ltd ADR is currently generating about 0.11 per unit of volatility. If you would invest  2,410  in Brambles Ltd ADR on December 22, 2024 and sell it today you would earn a total of  184.00  from holding Brambles Ltd ADR or generate 7.63% return on investment over 90 days.

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

CochLear Ltd ADR  vs.  Brambles Ltd ADR

CochLear ADR

Risk-Adjusted Performance

Very Weak

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

Brambles ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brambles Ltd ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Brambles may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CochLear and Brambles

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

The idea behind CochLear Ltd ADR and Brambles Ltd ADR 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.