Correlation Between Credit Suisse and ResMed

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Can any of the company-specific risk be diversified away by investing in both Credit Suisse and ResMed 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 Credit Suisse and ResMed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Credit Suisse X Links and ResMed Inc, you can compare the effects of market volatilities on Credit Suisse and ResMed 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 Credit Suisse with a short position of ResMed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credit Suisse and ResMed.

Diversification Opportunities for Credit Suisse and ResMed

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Credit and ResMed is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Credit Suisse X-Links and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc and Credit Suisse 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 Credit Suisse X Links are associated (or correlated) with ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Credit Suisse i.e., Credit Suisse and ResMed go up and down completely randomly.

Pair Corralation between Credit Suisse and ResMed

Given the investment horizon of 90 days Credit Suisse X Links is expected to generate 0.82 times more return on investment than ResMed. However, Credit Suisse X Links is 1.23 times less risky than ResMed. It trades about 0.03 of its potential returns per unit of risk. ResMed Inc is currently generating about -0.01 per unit of risk. If you would invest  6,204  in Credit Suisse X Links on December 29, 2023 and sell it today you would earn a total of  1,428  from holding Credit Suisse X Links or generate 23.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Credit Suisse X-Links  vs.  ResMed Inc

 Performance 
       Timeline  
Credit Suisse X-Links 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Credit Suisse X Links are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Credit Suisse demonstrated solid returns over the last few months and may actually be approaching a breakup point.
ResMed Inc 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal primary indicators, ResMed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Credit Suisse and ResMed Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Credit Suisse and ResMed

The main advantage of trading using opposite Credit Suisse and ResMed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credit Suisse position performs unexpectedly, ResMed 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 ResMed will offset losses from the drop in ResMed's long position.
The idea behind Credit Suisse X Links and ResMed Inc 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.
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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