Correlation Between CochLear and Demant AS
Can any of the company-specific risk be diversified away by investing in both CochLear and Demant AS 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 CochLear and Demant AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CochLear Ltd ADR and Demant AS ADR, you can compare the effects of market volatilities on CochLear and Demant AS 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 CochLear with a short position of Demant AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of CochLear and Demant AS.
Diversification Opportunities for CochLear and Demant AS
Modest diversification
The 3 months correlation between CochLear and Demant is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CochLear Ltd ADR and Demant AS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Demant AS ADR and CochLear 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 CochLear Ltd ADR are associated (or correlated) with Demant AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Demant AS ADR has no effect on the direction of CochLear i.e., CochLear and Demant AS go up and down completely randomly.
Pair Corralation between CochLear and Demant AS
Assuming the 90 days horizon CochLear Ltd ADR is expected to generate 0.87 times more return on investment than Demant AS. However, CochLear Ltd ADR is 1.14 times less risky than Demant AS. It trades about 0.04 of its potential returns per unit of risk. Demant AS ADR is currently generating about -0.01 per unit of risk. If you would invest 8,117 in CochLear Ltd ADR on August 30, 2024 and sell it today you would earn a total of 1,872 from holding CochLear Ltd ADR or generate 23.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CochLear Ltd ADR vs. Demant AS ADR
Performance |
| Timeline |
| CochLear ADR |
| Demant AS ADR |
CochLear and Demant AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CochLear and Demant AS
The main advantage of trading using opposite CochLear and Demant AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CochLear position performs unexpectedly, Demant AS 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 Demant AS will offset losses from the drop in Demant AS's long position.| CochLear vs. Smith Nephew SNATS | CochLear vs. Integer Holdings Corp | CochLear vs. Demant AS ADR | CochLear vs. GN Store Nord |
| Demant AS vs. CochLear Ltd ADR | Demant AS vs. GN Store Nord | Demant AS vs. GN Store Nord | Demant AS vs. Siemens Healthineers AG |
Check out your portfolio center.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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