Correlation Between Roche Holding and Swiss Leader
Can any of the company-specific risk be diversified away by investing in both Roche Holding and Swiss Leader 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 Roche Holding and Swiss Leader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roche Holding AG and Swiss Leader Price, you can compare the effects of market volatilities on Roche Holding and Swiss Leader 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 Roche Holding with a short position of Swiss Leader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roche Holding and Swiss Leader.
Diversification Opportunities for Roche Holding and Swiss Leader
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Roche and Swiss is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and Swiss Leader Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Leader Price and Roche Holding 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 Roche Holding AG are associated (or correlated) with Swiss Leader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Leader Price has no effect on the direction of Roche Holding i.e., Roche Holding and Swiss Leader go up and down completely randomly.
Pair Corralation between Roche Holding and Swiss Leader
Assuming the 90 days horizon Roche Holding AG is expected to generate 1.71 times more return on investment than Swiss Leader. However, Roche Holding is 1.71 times more volatile than Swiss Leader Price. It trades about 0.27 of its potential returns per unit of risk. Swiss Leader Price is currently generating about 0.25 per unit of risk. If you would invest 26,900 in Roche Holding AG on December 3, 2024 and sell it today you would earn a total of 5,200 from holding Roche Holding AG or generate 19.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Roche Holding AG vs. Swiss Leader Price
Performance |
| Timeline |
Roche Holding and Swiss Leader Volatility Contrast
Predicted Return Density |
| Returns |
Roche Holding AG
Pair trading matchups for Roche Holding
Swiss Leader Price
Pair trading matchups for Swiss Leader
Pair Trading with Roche Holding and Swiss Leader
The main advantage of trading using opposite Roche Holding and Swiss Leader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding position performs unexpectedly, Swiss Leader 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 Swiss Leader will offset losses from the drop in Swiss Leader's long position.| Roche Holding vs. Novartis AG | ||
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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