Correlation Between Glaukos Corp and CochLear

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

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

Diversification Opportunities for Glaukos Corp and CochLear

-0.45

Correlation Coefficient

Glaukos Corp  CochLear

Very good diversification

The 3 months correlation between Glaukos and CochLear is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Glaukos Corp and CochLear Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CochLear ADR and Glaukos Corp 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 Glaukos Corp are associated (or correlated) with CochLear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CochLear ADR has no effect on the direction of Glaukos Corp i.e., Glaukos Corp and CochLear go up and down completely randomly.

Pair Corralation between Glaukos Corp and CochLear

Given the investment horizon of 90 days Glaukos Corp is expected to generate 1.48 times more return on investment than CochLear. However, Glaukos Corp is 1.48 times more volatile than CochLear Ltd ADR. It trades about 0.27 of its potential returns per unit of risk. CochLear Ltd ADR is currently generating about -0.03 per unit of risk. If you would invest  8,431  in Glaukos Corp on February 4, 2024 and sell it today you would earn a total of  2,220  from holding Glaukos Corp or generate 26.33% return on investment over 90 days.

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

Glaukos Corp  vs.  CochLear Ltd ADR

Glaukos Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Glaukos Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Glaukos Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

CochLear ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CochLear Ltd ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CochLear may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Glaukos Corp and CochLear

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

The idea behind Glaukos Corp and CochLear Ltd ADR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.