Correlation Between Roche Holding and Addex Therapeutics

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

Diversification Opportunities for Roche Holding and Addex Therapeutics

-0.32

Correlation Coefficient

Roche Holding  Addex Therapeutics

Very good diversification

The 3 months correlation between Roche and Addex is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and Addex Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addex Therapeutics 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 Addex Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addex Therapeutics has no effect on the direction of Roche Holding i.e., Roche Holding and Addex Therapeutics go up and down completely randomly.

Pair Corralation between Roche Holding and Addex Therapeutics

Assuming the 90 days trading horizon Roche Holding AG is expected to generate 0.2 times more return on investment than Addex Therapeutics. However, Roche Holding AG is 5.11 times less risky than Addex Therapeutics. It trades about 0.26 of its potential returns per unit of risk. Addex Therapeutics is currently generating about 0.01 per unit of risk. If you would invest  24,732  in Roche Holding AG on December 29, 2024 and sell it today you would earn a total of  4,938  from holding Roche Holding AG or generate 19.97% return on investment over 90 days.

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

Roche Holding AG  vs.  Addex Therapeutics

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. In spite of fairly abnormal technical and fundamental indicators, Roche Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Addex Therapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Addex Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Addex Therapeutics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Roche Holding and Addex Therapeutics

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

The idea behind Roche Holding AG and Addex Therapeutics 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.