Correlation Between Roche Holding and Scilex Holding

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

Diversification Opportunities for Roche Holding and Scilex Holding

-0.84

Correlation Coefficient

Roche Holding  Scilex Holding

Pay attention - limited upside

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

Pair Corralation between Roche Holding and Scilex Holding

Assuming the 90 days horizon Roche Holding AG is expected to generate 0.08 times more return on investment than Scilex Holding. However, Roche Holding AG is 12.52 times less risky than Scilex Holding. It trades about 0.29 of its potential returns per unit of risk. Scilex Holding is currently generating about 0.01 per unit of risk. If you would invest  27,500  in Roche Holding AG on December 20, 2024 and sell it today you would earn a total of  7,650  from holding Roche Holding AG or generate 27.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	94.92%
Values	Daily Returns

Roche Holding AG  vs.  Scilex Holding

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 23 (%) 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.

Scilex Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scilex Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Scilex Holding may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Roche Holding and Scilex Holding

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

The idea behind Roche Holding AG and Scilex Holding 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 Transaction History module to view history of all your transactions and understand their impact on performance.