Correlation Between Baxter International and Innovative Eyewear
Can any of the company-specific risk be diversified away by investing in both Baxter International and Innovative Eyewear 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 Innovative Eyewear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baxter International and Innovative Eyewear, you can compare the effects of market volatilities on Baxter International and Innovative Eyewear 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 Innovative Eyewear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baxter International and Innovative Eyewear.
Diversification Opportunities for Baxter International and Innovative Eyewear
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Baxter and Innovative is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and Innovative Eyewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Eyewear 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 Innovative Eyewear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Eyewear has no effect on the direction of Baxter International i.e., Baxter International and Innovative Eyewear go up and down completely randomly.
Pair Corralation between Baxter International and Innovative Eyewear
Considering the 90-day investment horizon Baxter International is expected to generate 13.88 times less return on investment than Innovative Eyewear. But when comparing it to its historical volatility, Baxter International is 5.95 times less risky than Innovative Eyewear. It trades about 0.04 of its potential returns per unit of risk. Innovative Eyewear is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3.80 in Innovative Eyewear on December 2, 2024 and sell it today you would earn a total of 1.00 from holding Innovative Eyewear or generate 26.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Baxter International vs. Innovative Eyewear
Performance |
Timeline |
Baxter International |
Innovative Eyewear |
Baxter International and Innovative Eyewear Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Baxter International and Innovative Eyewear
The main advantage of trading using opposite Baxter International and Innovative Eyewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baxter International position performs unexpectedly, Innovative Eyewear 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 Innovative Eyewear will offset losses from the drop in Innovative Eyewear's long position.Baxter International vs. Embecta Corp | Baxter International vs. West Pharmaceutical Services | Baxter International vs. ResMed Inc | Baxter International vs. The Cooper Companies, |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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