Correlation Between Carl Zeiss and ResMed

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

By analyzing existing cross correlation between Carl Zeiss Meditec and ResMed Inc, you can compare the effects of market volatilities on Carl Zeiss and ResMed 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 Carl Zeiss with a short position of ResMed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carl Zeiss and ResMed.

Diversification Opportunities for Carl Zeiss and ResMed

-0.01

Correlation Coefficient

Carl Zeiss  ResMed

Good diversification

The 3 months correlation between Carl and ResMed is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Carl Zeiss Meditec and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc and Carl Zeiss 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 Carl Zeiss Meditec are associated (or correlated) with ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Carl Zeiss i.e., Carl Zeiss and ResMed go up and down completely randomly.

Pair Corralation between Carl Zeiss and ResMed

Assuming the 90 days horizon Carl Zeiss Meditec is expected to under-perform the ResMed. In addition to that, Carl Zeiss is 1.76 times more volatile than ResMed Inc. It trades about -0.12 of its total potential returns per unit of risk. ResMed Inc is currently generating about 0.04 per unit of volatility. If you would invest  21,255  in ResMed Inc on September 27, 2024 and sell it today you would earn a total of  2,135  from holding ResMed Inc or generate 10.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Carl Zeiss Meditec  vs.  ResMed Inc

Carl Zeiss Meditec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carl Zeiss Meditec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ResMed Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ResMed Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, ResMed is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Carl Zeiss and ResMed

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

The idea behind Carl Zeiss Meditec and ResMed Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.