Correlation Between CochLear and Sonova Holding

Can any of the company-specific risk be diversified away by investing in both CochLear 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 CochLear and Sonova Holding 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 Sonova Holding AG, you can compare the effects of market volatilities on CochLear 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 CochLear with a short position of Sonova Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of CochLear and Sonova Holding.

Diversification Opportunities for CochLear and Sonova Holding

-0.13

Correlation Coefficient

CochLear  Sonova Holding

Good diversification

The 3 months correlation between CochLear and Sonova is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding CochLear Ltd ADR 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 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 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 CochLear i.e., CochLear and Sonova Holding go up and down completely randomly.

Pair Corralation between CochLear and Sonova Holding

Assuming the 90 days horizon CochLear Ltd ADR is expected to generate 0.95 times more return on investment than Sonova Holding. However, CochLear Ltd ADR is 1.05 times less risky than Sonova Holding. It trades about -0.02 of its potential returns per unit of risk. Sonova Holding AG is currently generating about -0.06 per unit of risk. If you would invest  9,657  in CochLear Ltd ADR on September 12, 2024 and sell it today you would lose (259.00) from holding CochLear Ltd ADR or give up 2.68% of portfolio value over 90 days.

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

CochLear Ltd ADR  vs.  Sonova Holding AG

CochLear ADR

Risk-Adjusted Performance

0 of 100

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 newest 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 CochLear and Sonova Holding

The main advantage of trading using opposite CochLear and Sonova Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CochLear 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 CochLear Ltd ADR 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.