Correlation Between Lonza and Mettler Toledo

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

By analyzing existing cross correlation between Lonza Group and Mettler Toledo International, you can compare the effects of market volatilities on Lonza and Mettler Toledo 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 Lonza with a short position of Mettler Toledo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lonza and Mettler Toledo.

Diversification Opportunities for Lonza and Mettler Toledo

0.48

Correlation Coefficient

Lonza  Mettler Toledo

Very weak diversification

The 3 months correlation between Lonza and Mettler is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lonza Group and Mettler Toledo International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mettler Toledo Inter and Lonza 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 Lonza Group are associated (or correlated) with Mettler Toledo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mettler Toledo Inter has no effect on the direction of Lonza i.e., Lonza and Mettler Toledo go up and down completely randomly.

Pair Corralation between Lonza and Mettler Toledo

Assuming the 90 days horizon Lonza Group is expected to generate 2.08 times more return on investment than Mettler Toledo. However, Lonza is 2.08 times more volatile than Mettler Toledo International. It trades about 0.13 of its potential returns per unit of risk. Mettler Toledo International is currently generating about -0.08 per unit of risk. If you would invest  57,720  in Lonza Group on October 12, 2024 and sell it today you would earn a total of  3,230  from holding Lonza Group or generate 5.6% return on investment over 90 days.

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

Lonza Group  vs.  Mettler Toledo International

Lonza Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lonza Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Lonza is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Mettler Toledo Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mettler Toledo International 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 basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lonza and Mettler Toledo

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

The idea behind Lonza Group and Mettler Toledo International 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..