Correlation Between Solventum Corp and Cogstate

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

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

Diversification Opportunities for Solventum Corp and Cogstate

-0.41

Correlation Coefficient

Solventum Corp  Cogstate

Very good diversification

The 3 months correlation between Solventum and Cogstate is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Solventum Corp and Cogstate Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogstate Limited and Solventum 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 Solventum Corp are associated (or correlated) with Cogstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogstate Limited has no effect on the direction of Solventum Corp i.e., Solventum Corp and Cogstate go up and down completely randomly.

Pair Corralation between Solventum Corp and Cogstate

Given the investment horizon of 90 days Solventum Corp is expected to generate 0.57 times more return on investment than Cogstate. However, Solventum Corp is 1.76 times less risky than Cogstate. It trades about -0.02 of its potential returns per unit of risk. Cogstate Limited is currently generating about -0.02 per unit of risk. If you would invest  8,000  in Solventum Corp on August 27, 2024 and sell it today you would lose (919.00) from holding Solventum Corp or give up 11.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	45.58%
Values	Daily Returns

Solventum Corp  vs.  Cogstate Limited

Solventum Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solventum Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Solventum Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Cogstate Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogstate Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Pair Trading with Solventum Corp and Cogstate

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

The idea behind Solventum Corp and Cogstate Limited 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 Global Correlations module to find global opportunities by holding instruments from different markets.