Correlation Between ResMed and Alcon AG

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

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

Diversification Opportunities for ResMed and Alcon AG

0.06

Correlation Coefficient

ResMed  Alcon AG

Significant diversification

The 3 months correlation between ResMed and Alcon is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ResMed Inc and Alcon AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcon AG and ResMed 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 ResMed Inc are associated (or correlated) with Alcon AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcon AG has no effect on the direction of ResMed i.e., ResMed and Alcon AG go up and down completely randomly.

Pair Corralation between ResMed and Alcon AG

Considering the 90-day investment horizon ResMed Inc is expected to generate 0.99 times more return on investment than Alcon AG. However, ResMed Inc is 1.01 times less risky than Alcon AG. It trades about 0.09 of its potential returns per unit of risk. Alcon AG is currently generating about -0.16 per unit of risk. If you would invest  24,250  in ResMed Inc on August 31, 2024 and sell it today you would earn a total of  683.00  from holding ResMed Inc or generate 2.82% return on investment over 90 days.

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

ResMed Inc  vs.  Alcon AG

ResMed Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, ResMed is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Alcon AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alcon AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with ResMed and Alcon AG

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

The idea behind ResMed Inc and Alcon AG 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.