Correlation Between Stryker and Sonova Holding

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

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

Diversification Opportunities for Stryker and Sonova Holding

0.01

Correlation Coefficient

Stryker  Sonova Holding

Significant diversification

The 3 months correlation between Stryker and Sonova is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Stryker 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 Stryker 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 Stryker 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 Stryker i.e., Stryker and Sonova Holding go up and down completely randomly.

Pair Corralation between Stryker and Sonova Holding

Considering the 90-day investment horizon Stryker is expected to generate 0.63 times more return on investment than Sonova Holding. However, Stryker is 1.58 times less risky than Sonova Holding. It trades about -0.26 of its potential returns per unit of risk. Sonova Holding AG is currently generating about -0.27 per unit of risk. If you would invest  35,467  in Stryker on January 30, 2024 and sell it today you would lose (1,906) from holding Stryker or give up 5.37% of portfolio value over 90 days.

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

Stryker  vs.  Sonova Holding AG

Stryker

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Stryker may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 abnormal 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.

Pair Trading with Stryker and Sonova Holding

The main advantage of trading using opposite Stryker and Sonova Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stryker 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 Stryker 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.