Correlation Between Roche Holding and Schweizerische Nationalbank
Can any of the company-specific risk be diversified away by investing in both Roche Holding and Schweizerische Nationalbank 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 Schweizerische Nationalbank 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 Schweizerische Nationalbank, you can compare the effects of market volatilities on Roche Holding and Schweizerische Nationalbank 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 Schweizerische Nationalbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roche Holding and Schweizerische Nationalbank.
Diversification Opportunities for Roche Holding and Schweizerische Nationalbank
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Roche and Schweizerische is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and Schweizerische Nationalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schweizerische Nationalbank 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 Schweizerische Nationalbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schweizerische Nationalbank has no effect on the direction of Roche Holding i.e., Roche Holding and Schweizerische Nationalbank go up and down completely randomly.
Pair Corralation between Roche Holding and Schweizerische Nationalbank
Assuming the 90 days horizon Roche Holding AG is expected to generate 0.79 times more return on investment than Schweizerische Nationalbank. However, Roche Holding AG is 1.27 times less risky than Schweizerische Nationalbank. It trades about 0.02 of its potential returns per unit of risk. Schweizerische Nationalbank is currently generating about -0.03 per unit of risk. If you would invest 28,136 in Roche Holding AG on November 4, 2024 and sell it today you would earn a total of 2,204 from holding Roche Holding AG or generate 7.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.39% |
| Values | Daily Returns |
Roche Holding AG vs. Schweizerische Nationalbank
Performance |
| Timeline |
| Roche Holding AG |
| Schweizerische Nationalbank |
Roche Holding and Schweizerische Nationalbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roche Holding and Schweizerische Nationalbank
The main advantage of trading using opposite Roche Holding and Schweizerische Nationalbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding position performs unexpectedly, Schweizerische Nationalbank 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 Schweizerische Nationalbank will offset losses from the drop in Schweizerische Nationalbank's long position.| Roche Holding vs. Novartis AG | Roche Holding vs. Zurich Insurance Group | Roche Holding vs. Nestl SA | Roche Holding vs. Lonza Group AG |
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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