Correlation Between Carmat SA and ResMed

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

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

Diversification Opportunities for Carmat SA and ResMed

-0.52

Correlation Coefficient

Carmat SA  ResMed

Excellent diversification

The 3 months correlation between Carmat and ResMed is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Carmat SA and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc and Carmat SA 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 Carmat SA 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 Carmat SA i.e., Carmat SA and ResMed go up and down completely randomly.

Pair Corralation between Carmat SA and ResMed

Assuming the 90 days horizon Carmat SA is expected to generate 3.13 times more return on investment than ResMed. However, Carmat SA is 3.13 times more volatile than ResMed Inc. It trades about -0.03 of its potential returns per unit of risk. ResMed Inc is currently generating about -0.13 per unit of risk. If you would invest  105.00  in Carmat SA on September 23, 2024 and sell it today you would lose (5.00) from holding Carmat SA or give up 4.76% of portfolio value over 90 days.

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

Carmat SA  vs.  ResMed Inc

Carmat SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmat SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ResMed Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ResMed is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carmat SA and ResMed

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

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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 Stocks Directory module to find actively traded stocks across global markets.