Correlation Between Alcon AG and BIOLASE

Can any of the company-specific risk be diversified away by investing in both Alcon AG and BIOLASE 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 Alcon AG and BIOLASE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcon AG and BIOLASE, you can compare the effects of market volatilities on Alcon AG and BIOLASE 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 Alcon AG with a short position of BIOLASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcon AG and BIOLASE.

Diversification Opportunities for Alcon AG and BIOLASE

-0.64

Correlation Coefficient

Alcon AG  BIOLASE

Excellent diversification

The 3 months correlation between Alcon and BIOLASE is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alcon AG and BIOLASE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIOLASE and Alcon AG 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 Alcon AG are associated (or correlated) with BIOLASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIOLASE has no effect on the direction of Alcon AG i.e., Alcon AG and BIOLASE go up and down completely randomly.

Pair Corralation between Alcon AG and BIOLASE

Considering the 90-day investment horizon Alcon AG is expected to generate 0.17 times more return on investment than BIOLASE. However, Alcon AG is 6.01 times less risky than BIOLASE. It trades about 0.03 of its potential returns per unit of risk. BIOLASE is currently generating about -0.15 per unit of risk. If you would invest  7,434  in Alcon AG on February 1, 2024 and sell it today you would earn a total of  324.00  from holding Alcon AG or generate 4.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Alcon AG  vs.  BIOLASE

Alcon AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alcon AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Alcon AG is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

BIOLASE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BIOLASE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Alcon AG and BIOLASE

The main advantage of trading using opposite Alcon AG and BIOLASE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcon AG position performs unexpectedly, BIOLASE 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 BIOLASE will offset losses from the drop in BIOLASE's long position.

The idea behind Alcon AG and BIOLASE 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.