Correlation Between CochLear and Icad

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

By analyzing existing cross correlation between CochLear Ltd ADR and icad inc, you can compare the effects of market volatilities on CochLear and Icad 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 CochLear with a short position of Icad. Check out your portfolio center. Please also check ongoing floating volatility patterns of CochLear and Icad.

Diversification Opportunities for CochLear and Icad

-0.25

Correlation Coefficient

CochLear  Icad

Very good diversification

The 3 months correlation between CochLear and Icad is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding CochLear Ltd ADR and icad inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on icad inc and CochLear 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 CochLear Ltd ADR are associated (or correlated) with Icad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of icad inc has no effect on the direction of CochLear i.e., CochLear and Icad go up and down completely randomly.

Pair Corralation between CochLear and Icad

Assuming the 90 days horizon CochLear is expected to generate 30.28 times less return on investment than Icad. But when comparing it to its historical volatility, CochLear Ltd ADR is 4.2 times less risky than Icad. It trades about 0.01 of its potential returns per unit of risk. icad inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  151.00  in icad inc on September 4, 2024 and sell it today you would earn a total of  25.00  from holding icad inc or generate 16.56% return on investment over 90 days.

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

CochLear Ltd ADR  vs.  icad inc

CochLear ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CochLear Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, CochLear is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

icad inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in icad inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Icad exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CochLear and Icad

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

The idea behind CochLear Ltd ADR and icad 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.