Correlation Between EMS CHEMIE and Lonza Group
Can any of the company-specific risk be diversified away by investing in both EMS CHEMIE and Lonza 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 EMS CHEMIE and Lonza Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMS CHEMIE HOLDING AG and Lonza Group AG, you can compare the effects of market volatilities on EMS CHEMIE and Lonza 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 EMS CHEMIE with a short position of Lonza Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMS CHEMIE and Lonza Group.
Diversification Opportunities for EMS CHEMIE and Lonza Group
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EMS and Lonza is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding EMS CHEMIE HOLDING AG and Lonza Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonza Group AG and EMS CHEMIE 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 EMS CHEMIE HOLDING AG are associated (or correlated) with Lonza Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonza Group AG has no effect on the direction of EMS CHEMIE i.e., EMS CHEMIE and Lonza Group go up and down completely randomly.
Pair Corralation between EMS CHEMIE and Lonza Group
Assuming the 90 days trading horizon EMS CHEMIE HOLDING AG is expected to generate 1.06 times more return on investment than Lonza Group. However, EMS CHEMIE is 1.06 times more volatile than Lonza Group AG. It trades about -0.08 of its potential returns per unit of risk. Lonza Group AG is currently generating about -0.14 per unit of risk. If you would invest 64,600 in EMS CHEMIE HOLDING AG on December 1, 2024 and sell it today you would lose (1,600) from holding EMS CHEMIE HOLDING AG or give up 2.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMS CHEMIE HOLDING AG vs. Lonza Group AG
Performance |
| Timeline |
| EMS CHEMIE HOLDING |
| Lonza Group AG |
EMS CHEMIE and Lonza Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMS CHEMIE and Lonza Group
The main advantage of trading using opposite EMS CHEMIE and Lonza Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMS CHEMIE position performs unexpectedly, Lonza 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 Lonza Group will offset losses from the drop in Lonza Group's long position.| EMS CHEMIE vs. Metall Zug AG | EMS CHEMIE vs. Zurich Insurance Group | EMS CHEMIE vs. Basler Kantonalbank | EMS CHEMIE vs. Softwareone Holding |
| Lonza Group vs. Sika AG | Lonza Group vs. Givaudan SA | Lonza Group vs. Geberit AG | Lonza Group vs. Swiss Life Holding |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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