Correlation Between Nu-Med Plus and CochLear

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

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

Diversification Opportunities for Nu-Med Plus and CochLear

0.14

Correlation Coefficient

Nu-Med Plus  CochLear

Average diversification

The 3 months correlation between Nu-Med and CochLear is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nu Med Plus and CochLear Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CochLear ADR and Nu-Med Plus 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 Nu Med Plus 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 Nu-Med Plus i.e., Nu-Med Plus and CochLear go up and down completely randomly.

Pair Corralation between Nu-Med Plus and CochLear

Given the investment horizon of 90 days Nu Med Plus is expected to generate 9.65 times more return on investment than CochLear. However, Nu-Med Plus is 9.65 times more volatile than CochLear Ltd ADR. It trades about 0.06 of its potential returns per unit of risk. CochLear Ltd ADR is currently generating about 0.04 per unit of risk. If you would invest  1.50  in Nu Med Plus on October 23, 2024 and sell it today you would lose (0.55) from holding Nu Med Plus or give up 36.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Nu Med Plus  vs.  CochLear Ltd ADR

Nu Med Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nu Med Plus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's primary 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.

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.

Pair Trading with Nu-Med Plus and CochLear

The main advantage of trading using opposite Nu-Med Plus and CochLear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nu-Med Plus 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 Nu Med Plus 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.