Correlation Between Resmed and HOYA

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

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

Diversification Opportunities for Resmed and HOYA

0.19

Correlation Coefficient

Resmed  HOYA

Average diversification

The 3 months correlation between Resmed and HOYA is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Resmed Inc DRC and HOYA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOYA and Resmed 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 Resmed Inc DRC are associated (or correlated) with HOYA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOYA has no effect on the direction of Resmed i.e., Resmed and HOYA go up and down completely randomly.

Pair Corralation between Resmed and HOYA

Assuming the 90 days trading horizon Resmed is expected to generate 50.96 times less return on investment than HOYA. But when comparing it to its historical volatility, Resmed Inc DRC is 4.3 times less risky than HOYA. It trades about 0.01 of its potential returns per unit of risk. HOYA Corporation is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,952  in HOYA Corporation on September 23, 2024 and sell it today you would earn a total of  3,978  from holding HOYA Corporation or generate 50.03% return on investment over 90 days.

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

Resmed Inc DRC  vs.  HOYA Corp.

Resmed Inc DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Resmed Inc DRC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Resmed is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

HOYA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HOYA Corporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HOYA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Resmed and HOYA

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

The idea behind Resmed Inc DRC and HOYA Corporation 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.