Correlation Between Covestro ADR and Sonova Holding
Can any of the company-specific risk be diversified away by investing in both Covestro ADR and Sonova Holding 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 Covestro ADR and Sonova Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Covestro ADR and Sonova Holding AG, you can compare the effects of market volatilities on Covestro ADR and Sonova Holding 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 Covestro ADR with a short position of Sonova Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Covestro ADR and Sonova Holding.
Diversification Opportunities for Covestro ADR and Sonova Holding
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Covestro and Sonova is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Covestro ADR and Sonova Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonova Holding AG and Covestro ADR 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 Covestro ADR are associated (or correlated) with Sonova Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonova Holding AG has no effect on the direction of Covestro ADR i.e., Covestro ADR and Sonova Holding go up and down completely randomly.
Pair Corralation between Covestro ADR and Sonova Holding
Assuming the 90 days horizon Covestro ADR is expected to generate 0.49 times more return on investment than Sonova Holding. However, Covestro ADR is 2.04 times less risky than Sonova Holding. It trades about -0.24 of its potential returns per unit of risk. Sonova Holding AG is currently generating about -0.35 per unit of risk. If you would invest 3,143 in Covestro ADR on August 28, 2024 and sell it today you would lose (119.00) from holding Covestro ADR or give up 3.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Covestro ADR vs. Sonova Holding AG
Performance |
| Timeline |
| Covestro ADR |
| Sonova Holding AG |
Covestro ADR and Sonova Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Covestro ADR and Sonova Holding
The main advantage of trading using opposite Covestro ADR and Sonova Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Covestro ADR position performs unexpectedly, Sonova Holding 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 Sonova Holding will offset losses from the drop in Sonova Holding's long position.| Covestro ADR vs. First Graphene | Covestro ADR vs. HUMANA INC | Covestro ADR vs. Aquagold International | Covestro ADR vs. Barloworld Ltd ADR |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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