Correlation Between Sonova Holding and Stryker

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

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

Diversification Opportunities for Sonova Holding and Stryker

-0.3

Correlation Coefficient

Sonova Holding  Stryker

Very good diversification

The 3 months correlation between Sonova and Stryker is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sonova Holding AG and Stryker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stryker and Sonova 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 Sonova Holding AG are associated (or correlated) with Stryker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stryker has no effect on the direction of Sonova Holding i.e., Sonova Holding and Stryker go up and down completely randomly.

Pair Corralation between Sonova Holding and Stryker

Assuming the 90 days horizon Sonova Holding AG is expected to under-perform the Stryker. In addition to that, Sonova Holding is 2.08 times more volatile than Stryker. It trades about -0.23 of its total potential returns per unit of risk. Stryker is currently generating about -0.36 per unit of volatility. If you would invest  35,238  in Stryker on January 20, 2024 and sell it today you would lose (2,695) from holding Stryker or give up 7.65% of portfolio value over 90 days.

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

Sonova Holding AG  vs.  Stryker

Sonova Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonova Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Stryker

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Stryker is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sonova Holding and Stryker

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

The idea behind Sonova Holding AG and Stryker 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.