Correlation Between Smith Nephew and Sonova Holding
Can any of the company-specific risk be diversified away by investing in both Smith Nephew 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 Smith Nephew and Sonova Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smith Nephew plc and Sonova Holding AG, you can compare the effects of market volatilities on Smith Nephew 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 Smith Nephew with a short position of Sonova Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith Nephew and Sonova Holding.
Diversification Opportunities for Smith Nephew and Sonova Holding
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Smith and Sonova is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Smith Nephew plc 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 Smith Nephew 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 Smith Nephew plc 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 Smith Nephew i.e., Smith Nephew and Sonova Holding go up and down completely randomly.
Pair Corralation between Smith Nephew and Sonova Holding
Assuming the 90 days horizon Smith Nephew plc is expected to under-perform the Sonova Holding. In addition to that, Smith Nephew is 1.51 times more volatile than Sonova Holding AG. It trades about -0.19 of its total potential returns per unit of risk. Sonova Holding AG is currently generating about -0.05 per unit of volatility. If you would invest 7,194 in Sonova Holding AG on August 26, 2024 and sell it today you would lose (219.00) from holding Sonova Holding AG or give up 3.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smith Nephew plc vs. Sonova Holding AG
Performance |
| Timeline |
| Smith Nephew plc |
| Sonova Holding AG |
Smith Nephew and Sonova Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smith Nephew and Sonova Holding
The main advantage of trading using opposite Smith Nephew and Sonova Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith Nephew 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.The idea behind Smith Nephew plc and Sonova Holding AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Sonova Holding vs. GN Store Nord | Sonova Holding vs. GN Store Nord | Sonova Holding vs. Bone Biologics Corp | Sonova Holding vs. Smith Nephew plc |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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