Correlation Between Scilex Holding and Roche Holding

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

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

Diversification Opportunities for Scilex Holding and Roche Holding

0.14

Correlation Coefficient

Scilex Holding  Roche Holding

Average diversification

The 3 months correlation between Scilex and Roche is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Scilex Holding and Roche Holding Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding and Scilex 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 Scilex Holding are associated (or correlated) with Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding has no effect on the direction of Scilex Holding i.e., Scilex Holding and Roche Holding go up and down completely randomly.

Pair Corralation between Scilex Holding and Roche Holding

Assuming the 90 days horizon Scilex Holding is expected to generate 9.96 times more return on investment than Roche Holding. However, Scilex Holding is 9.96 times more volatile than Roche Holding Ltd. It trades about 0.03 of its potential returns per unit of risk. Roche Holding Ltd is currently generating about 0.02 per unit of risk. If you would invest  140.00  in Scilex Holding on October 25, 2024 and sell it today you would lose (119.00) from holding Scilex Holding or give up 85.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Scilex Holding  vs.  Roche Holding Ltd

Scilex Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scilex Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Scilex Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Roche Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roche Holding Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Roche Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Scilex Holding and Roche Holding

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

The idea behind Scilex Holding and Roche Holding Ltd 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.