Correlation Between Carl Zeiss and Straumann Holding

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

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

Diversification Opportunities for Carl Zeiss and Straumann Holding

0.7

Correlation Coefficient

Carl Zeiss  Straumann Holding

Poor diversification

The 3 months correlation between Carl and Straumann is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Carl Zeiss Meditec and Straumann Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Straumann Holding and Carl Zeiss 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 Carl Zeiss Meditec are associated (or correlated) with Straumann Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Straumann Holding has no effect on the direction of Carl Zeiss i.e., Carl Zeiss and Straumann Holding go up and down completely randomly.

Pair Corralation between Carl Zeiss and Straumann Holding

Assuming the 90 days horizon Carl Zeiss Meditec is expected to under-perform the Straumann Holding. In addition to that, Carl Zeiss is 1.76 times more volatile than Straumann Holding AG. It trades about -0.04 of its total potential returns per unit of risk. Straumann Holding AG is currently generating about -0.05 per unit of volatility. If you would invest  1,418  in Straumann Holding AG on September 3, 2024 and sell it today you would lose (119.00) from holding Straumann Holding AG or give up 8.39% of portfolio value over 90 days.

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

Carl Zeiss Meditec  vs.  Straumann Holding AG

Carl Zeiss Meditec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carl Zeiss Meditec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Straumann Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Straumann Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Carl Zeiss and Straumann Holding

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

The idea behind Carl Zeiss Meditec and Straumann 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.