Correlation Between Koninklijke Philips and ZimVie

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

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

Diversification Opportunities for Koninklijke Philips and ZimVie

-0.03

Correlation Coefficient

Koninklijke Philips  ZimVie

Good diversification

The 3 months correlation between Koninklijke and ZimVie is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and ZimVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZimVie Inc and Koninklijke Philips 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 Koninklijke Philips NV are associated (or correlated) with ZimVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZimVie Inc has no effect on the direction of Koninklijke Philips i.e., Koninklijke Philips and ZimVie go up and down completely randomly.

Pair Corralation between Koninklijke Philips and ZimVie

Considering the 90-day investment horizon Koninklijke Philips NV is expected to generate 0.74 times more return on investment than ZimVie. However, Koninklijke Philips NV is 1.35 times less risky than ZimVie. It trades about -0.1 of its potential returns per unit of risk. ZimVie Inc is currently generating about -0.11 per unit of risk. If you would invest  2,696  in Koninklijke Philips NV on March 12, 2024 and sell it today you would lose (66.00) from holding Koninklijke Philips NV or give up 2.45% of portfolio value over 90 days.

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

Koninklijke Philips NV  vs.  ZimVie Inc

Koninklijke Philips

Risk-Adjusted Performance

9 of 100

OK

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

ZimVie Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZimVie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, ZimVie is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Koninklijke Philips and ZimVie

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

The idea behind Koninklijke Philips NV and ZimVie 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..