Correlation Between Baxter International and LIFWZ Old

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

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

Diversification Opportunities for Baxter International and LIFWZ Old

0.0

Correlation Coefficient

Baxter International  LIFWZ Old

Pay attention - limited upside

The 3 months correlation between Baxter and LIFWZ is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and LIFWZ Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFWZ Old 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 LIFWZ Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFWZ Old has no effect on the direction of Baxter International i.e., Baxter International and LIFWZ Old go up and down completely randomly.

Pair Corralation between Baxter International and LIFWZ Old

If you would invest  2,906  in Baxter International on December 27, 2024 and sell it today you would earn a total of  430.00  from holding Baxter International or generate 14.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Baxter International  vs.  LIFWZ Old

Baxter International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baxter International are ranked lower than 10 (%) 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.

LIFWZ Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days LIFWZ Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, LIFWZ Old is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Baxter International and LIFWZ Old

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

The idea behind Baxter International and LIFWZ Old 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .