Correlation Between Roche Holding and Ono Pharmaceutical

Can any of the company-specific risk be diversified away by investing in both Roche Holding and Ono 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 Ono 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 Ono Pharmaceutical Co, you can compare the effects of market volatilities on Roche Holding and Ono 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 Ono Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roche Holding and Ono Pharmaceutical.

Diversification Opportunities for Roche Holding and Ono Pharmaceutical

-0.84

Correlation Coefficient

Roche Holding  Ono Pharmaceutical

Pay attention - limited upside

The 3 months correlation between Roche and Ono is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and Ono Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ono 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 Ono Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ono Pharmaceutical has no effect on the direction of Roche Holding i.e., Roche Holding and Ono Pharmaceutical go up and down completely randomly.

Pair Corralation between Roche Holding and Ono Pharmaceutical

Assuming the 90 days horizon Roche Holding AG is expected to generate 0.27 times more return on investment than Ono Pharmaceutical. However, Roche Holding AG is 3.66 times less risky than Ono Pharmaceutical. It trades about 0.26 of its potential returns per unit of risk. Ono Pharmaceutical Co is currently generating about 0.05 per unit of risk. If you would invest  28,086  in Roche Holding AG on December 27, 2024 and sell it today you would earn a total of  6,914  from holding Roche Holding AG or generate 24.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	41.67%
Values	Daily Returns

Roche Holding AG  vs.  Ono Pharmaceutical Co

Roche Holding AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Roche Holding AG are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Roche Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Ono Pharmaceutical

Risk-Adjusted Performance

Insignificant

Over the last 90 days Ono Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak essential indicators, Ono Pharmaceutical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roche Holding and Ono Pharmaceutical

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

The idea behind Roche Holding AG and Ono 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.