Correlation Between Cochlear and Light Wonder
Can any of the company-specific risk be diversified away by investing in both Cochlear and Light Wonder 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 Light Wonder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cochlear and Light Wonder, you can compare the effects of market volatilities on Cochlear and Light Wonder 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 Light Wonder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cochlear and Light Wonder.
Diversification Opportunities for Cochlear and Light Wonder
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Cochlear and Light is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cochlear and Light Wonder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Light Wonder 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 are associated (or correlated) with Light Wonder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Light Wonder has no effect on the direction of Cochlear i.e., Cochlear and Light Wonder go up and down completely randomly.
Pair Corralation between Cochlear and Light Wonder
Assuming the 90 days trading horizon Cochlear is expected to generate 1.54 times less return on investment than Light Wonder. But when comparing it to its historical volatility, Cochlear is 1.52 times less risky than Light Wonder. It trades about 0.07 of its potential returns per unit of risk. Light Wonder is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 9,100 in Light Wonder on August 31, 2024 and sell it today you would earn a total of 5,713 from holding Light Wonder or generate 62.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 80.29% |
| Values | Daily Returns |
Cochlear vs. Light Wonder
Performance |
| Timeline |
| Cochlear |
| Light Wonder |
Cochlear and Light Wonder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cochlear and Light Wonder
The main advantage of trading using opposite Cochlear and Light Wonder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cochlear position performs unexpectedly, Light Wonder 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 Light Wonder will offset losses from the drop in Light Wonder's long position.| Cochlear vs. Aurelia Metals | Cochlear vs. Alto Metals | Cochlear vs. Richmond Vanadium Technology | Cochlear vs. Centuria Industrial Reit |
| Light Wonder vs. Hawsons Iron | Light Wonder vs. Spirit Telecom | Light Wonder vs. TPG Telecom | Light Wonder vs. The Environmental Group |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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