Correlation Between GN Store and CochLear

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

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

Diversification Opportunities for GN Store and CochLear

0.14

Correlation Coefficient

GN Store  CochLear

Average diversification

The 3 months correlation between GNNDY and CochLear is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding GN Store Nord and CochLear Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CochLear ADR and GN Store 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 GN Store Nord 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 ADR has no effect on the direction of GN Store i.e., GN Store and CochLear go up and down completely randomly.

Pair Corralation between GN Store and CochLear

Assuming the 90 days horizon GN Store Nord is expected to under-perform the CochLear. In addition to that, GN Store is 1.21 times more volatile than CochLear Ltd ADR. It trades about -0.19 of its total potential returns per unit of risk. CochLear Ltd ADR is currently generating about 0.02 per unit of volatility. If you would invest  9,869  in CochLear Ltd ADR on September 2, 2024 and sell it today you would earn a total of  100.00  from holding CochLear Ltd ADR or generate 1.01% return on investment over 90 days.

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

GN Store Nord  vs.  CochLear Ltd ADR

GN Store Nord

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GN Store Nord has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CochLear ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CochLear Ltd ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with GN Store and CochLear

The main advantage of trading using opposite GN Store and CochLear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GN Store 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 GN Store Nord and CochLear 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.