Correlation Between Baxter International and Globus Medical

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

By analyzing existing cross correlation between Baxter International and Globus Medical, you can compare the effects of market volatilities on Baxter International and Globus Medical 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 Globus Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baxter International and Globus Medical.

Diversification Opportunities for Baxter International and Globus Medical

-0.53

Correlation Coefficient

Baxter International  Globus Medical

Excellent diversification

The 3 months correlation between Baxter and Globus is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and Globus Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globus Medical 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 Globus Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globus Medical has no effect on the direction of Baxter International i.e., Baxter International and Globus Medical go up and down completely randomly.

Pair Corralation between Baxter International and Globus Medical

Considering the 90-day investment horizon Baxter International is expected to generate 1.09 times more return on investment than Globus Medical. However, Baxter International is 1.09 times more volatile than Globus Medical. It trades about 0.16 of its potential returns per unit of risk. Globus Medical is currently generating about -0.1 per unit of risk. If you would invest  2,849  in Baxter International on December 28, 2024 and sell it today you would earn a total of  521.00  from holding Baxter International or generate 18.29% return on investment over 90 days.

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

Baxter International  vs.  Globus Medical

Baxter International

Risk-Adjusted Performance

Good

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

Globus Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globus Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Baxter International and Globus Medical

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

The idea behind Baxter International and Globus Medical 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.