Correlation Between Chewy and Alcon AG
Can any of the company-specific risk be diversified away by investing in both Chewy and Alcon AG 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 Chewy and Alcon AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chewy Inc and Alcon AG, you can compare the effects of market volatilities on Chewy and Alcon AG 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 Chewy with a short position of Alcon AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chewy and Alcon AG.
Diversification Opportunities for Chewy and Alcon AG
Excellent diversification
The 3 months correlation between Chewy and Alcon is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc and Alcon AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcon AG and Chewy 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 Chewy Inc are associated (or correlated) with Alcon AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcon AG has no effect on the direction of Chewy i.e., Chewy and Alcon AG go up and down completely randomly.
Pair Corralation between Chewy and Alcon AG
Given the investment horizon of 90 days Chewy Inc is expected to generate 1.7 times more return on investment than Alcon AG. However, Chewy is 1.7 times more volatile than Alcon AG. It trades about -0.11 of its potential returns per unit of risk. Alcon AG is currently generating about -0.22 per unit of risk. If you would invest 3,352 in Chewy Inc on September 12, 2024 and sell it today you would lose (215.00) from holding Chewy Inc or give up 6.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chewy Inc vs. Alcon AG
Performance |
| Timeline |
| Chewy Inc |
| Alcon AG |
Chewy and Alcon AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chewy and Alcon AG
The main advantage of trading using opposite Chewy and Alcon AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chewy position performs unexpectedly, Alcon AG 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 Alcon AG will offset losses from the drop in Alcon AG's long position.The idea behind Chewy Inc and Alcon 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.| Alcon AG vs. West Pharmaceutical Services | Alcon AG vs. ResMed Inc | Alcon AG vs. ICU Medical | Alcon AG vs. The Cooper Companies, |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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