Correlation Between Cochlear and Wellnex Life

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

By analyzing existing cross correlation between Cochlear and Wellnex Life, you can compare the effects of market volatilities on Cochlear and Wellnex Life 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 Wellnex Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cochlear and Wellnex Life.

Diversification Opportunities for Cochlear and Wellnex Life

-0.28

Correlation Coefficient

Cochlear  Wellnex Life

Very good diversification

The 3 months correlation between Cochlear and Wellnex is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cochlear and Wellnex Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wellnex Life 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 are associated (or correlated) with Wellnex Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wellnex Life has no effect on the direction of Cochlear i.e., Cochlear and Wellnex Life go up and down completely randomly.

Pair Corralation between Cochlear and Wellnex Life

Assuming the 90 days trading horizon Cochlear is expected to generate 3.37 times less return on investment than Wellnex Life. But when comparing it to its historical volatility, Cochlear is 7.24 times less risky than Wellnex Life. It trades about 0.12 of its potential returns per unit of risk. Wellnex Life is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Wellnex Life on October 23, 2024 and sell it today you would earn a total of  5.00  from holding Wellnex Life or generate 8.06% return on investment over 90 days.

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

Cochlear  vs.  Wellnex Life

Cochlear

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cochlear are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Cochlear may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wellnex Life

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wellnex Life are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wellnex Life unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cochlear and Wellnex Life

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

The idea behind Cochlear and Wellnex Life 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.