Correlation Between Roche Holding and Chugai Pharmaceutical

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

By analyzing existing cross correlation between Roche Holding AG and Chugai Pharmaceutical Co, you can compare the effects of market volatilities on Roche Holding and Chugai Pharmaceutical 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 Roche Holding with a short position of Chugai Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roche Holding and Chugai Pharmaceutical.

Diversification Opportunities for Roche Holding and Chugai Pharmaceutical

0.75

Correlation Coefficient

Roche Holding  Chugai Pharmaceutical

Poor diversification

The 3 months correlation between Roche and Chugai is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and Chugai Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chugai Pharmaceutical and Roche Holding 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 Roche Holding AG are associated (or correlated) with Chugai Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chugai Pharmaceutical has no effect on the direction of Roche Holding i.e., Roche Holding and Chugai Pharmaceutical go up and down completely randomly.

Pair Corralation between Roche Holding and Chugai Pharmaceutical

Assuming the 90 days horizon Roche Holding AG is expected to under-perform the Chugai Pharmaceutical. In addition to that, Roche Holding is 1.33 times more volatile than Chugai Pharmaceutical Co. It trades about -0.06 of its total potential returns per unit of risk. Chugai Pharmaceutical Co is currently generating about -0.06 per unit of volatility. If you would invest  2,388  in Chugai Pharmaceutical Co on September 16, 2024 and sell it today you would lose (241.00) from holding Chugai Pharmaceutical Co or give up 10.09% of portfolio value over 90 days.

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

Roche Holding AG  vs.  Chugai Pharmaceutical Co

Roche Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roche Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Chugai Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chugai Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Roche Holding and Chugai Pharmaceutical

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

The idea behind Roche Holding AG and Chugai Pharmaceutical Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.