Correlation Between Baxter International and Stryker

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Can any of the company-specific risk be diversified away by investing in both Baxter International and Stryker 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 Baxter International and Stryker into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baxter International and Stryker, you can compare the effects of market volatilities on Baxter International and Stryker 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 Baxter International with a short position of Stryker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baxter International and Stryker.

Diversification Opportunities for Baxter International and Stryker

-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Baxter and Stryker is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and Stryker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stryker and Baxter International 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 Baxter International are associated (or correlated) with Stryker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stryker has no effect on the direction of Baxter International i.e., Baxter International and Stryker go up and down completely randomly.

Pair Corralation between Baxter International and Stryker

Considering the 90-day investment horizon Baxter International is not expected to generate positive returns. Moreover, Baxter International is 1.5 times more volatile than Stryker. It trades away all of its potential returns to assume current level of volatility. Stryker is currently generating about 0.08 per unit of risk. If you would invest  34,482  in Stryker on September 9, 2024 and sell it today you would earn a total of  4,020  from holding Stryker or generate 11.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Baxter International  vs.  Stryker

 Performance 
       Timeline  
Baxter International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Baxter International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Stryker 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Stryker may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baxter International and Stryker Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Baxter International and Stryker

The main advantage of trading using opposite Baxter International and Stryker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baxter International position performs unexpectedly, Stryker 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 Stryker will offset losses from the drop in Stryker's long position.
The idea behind Baxter International and Stryker 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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