Correlation Between Alcon AG and Tecan Group

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Can any of the company-specific risk be diversified away by investing in both Alcon AG and Tecan Group 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 Alcon AG and Tecan Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcon AG and Tecan Group, you can compare the effects of market volatilities on Alcon AG and Tecan Group 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 Alcon AG with a short position of Tecan Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcon AG and Tecan Group.

Diversification Opportunities for Alcon AG and Tecan Group

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Alcon and Tecan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Alcon AG and Tecan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecan Group and Alcon AG 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 Alcon AG are associated (or correlated) with Tecan Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecan Group has no effect on the direction of Alcon AG i.e., Alcon AG and Tecan Group go up and down completely randomly.

Pair Corralation between Alcon AG and Tecan Group

Considering the 90-day investment horizon Alcon AG is expected to generate 0.64 times more return on investment than Tecan Group. However, Alcon AG is 1.56 times less risky than Tecan Group. It trades about -0.01 of its potential returns per unit of risk. Tecan Group is currently generating about -0.15 per unit of risk. If you would invest  8,823  in Alcon AG on August 24, 2024 and sell it today you would lose (266.00) from holding Alcon AG or give up 3.01% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Alcon AG  vs.  Tecan Group

 Performance 
       Timeline  
Alcon AG 

Risk-Adjusted Performance

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Weak
 
Strong
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 conflicting 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.
Tecan Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Tecan Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Alcon AG and Tecan Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcon AG and Tecan Group

The main advantage of trading using opposite Alcon AG and Tecan Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcon AG position performs unexpectedly, Tecan Group 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 Tecan Group will offset losses from the drop in Tecan Group's long position.
The idea behind Alcon AG and Tecan Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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