Correlation Between Secom Co and Sonova Holding

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

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

Diversification Opportunities for Secom Co and Sonova Holding

-0.61

Correlation Coefficient

Secom Co  Sonova Holding

Excellent diversification

The 3 months correlation between Secom and Sonova is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Secom Co Ltd and Sonova Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonova Holding AG and Secom Co 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 Secom Co Ltd are associated (or correlated) with Sonova Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonova Holding AG has no effect on the direction of Secom Co i.e., Secom Co and Sonova Holding go up and down completely randomly.

Pair Corralation between Secom Co and Sonova Holding

Assuming the 90 days horizon Secom Co Ltd is expected to generate 0.86 times more return on investment than Sonova Holding. However, Secom Co Ltd is 1.16 times less risky than Sonova Holding. It trades about 0.06 of its potential returns per unit of risk. Sonova Holding AG is currently generating about -0.12 per unit of risk. If you would invest  844.00  in Secom Co Ltd on December 26, 2024 and sell it today you would earn a total of  30.00  from holding Secom Co Ltd or generate 3.55% return on investment over 90 days.

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

Secom Co Ltd  vs.  Sonova Holding AG

Secom Co

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Secom Co Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Secom Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sonova Holding AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonova Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Secom Co and Sonova Holding

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

The idea behind Secom Co Ltd and Sonova Holding 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 Stocks Directory module to find actively traded stocks across global markets.