Correlation Between Demant AS and CochLear

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

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

Diversification Opportunities for Demant AS and CochLear

0.13

Correlation Coefficient

Demant AS  CochLear

Average diversification

The 3 months correlation between Demant and CochLear is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Demant AS ADR and CochLear Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CochLear ADR and Demant AS 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 Demant AS ADR are associated (or correlated) with CochLear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CochLear ADR has no effect on the direction of Demant AS i.e., Demant AS and CochLear go up and down completely randomly.

Pair Corralation between Demant AS and CochLear

Assuming the 90 days horizon Demant AS ADR is expected to under-perform the CochLear. But the pink sheet apears to be less risky and, when comparing its historical volatility, Demant AS ADR is 2.29 times less risky than CochLear. The pink sheet trades about -0.28 of its potential returns per unit of risk. The CochLear Ltd ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,869  in CochLear Ltd ADR on September 2, 2024 and sell it today you would earn a total of  100.00  from holding CochLear Ltd ADR or generate 1.01% return on investment over 90 days.

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

Demant AS ADR  vs.  CochLear Ltd ADR

Demant AS ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Demant AS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

CochLear ADR

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Demant AS and CochLear

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

The idea behind Demant AS ADR and CochLear Ltd ADR 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.