Correlation Between Baxter International and Spine Injury

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

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

Diversification Opportunities for Baxter International and Spine Injury

-0.7

Correlation Coefficient

Baxter International  Spine Injury

Excellent diversification

The 3 months correlation between Baxter and Spine is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and Spine Injury Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spine Injury Solutions 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 Spine Injury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spine Injury Solutions has no effect on the direction of Baxter International i.e., Baxter International and Spine Injury go up and down completely randomly.

Pair Corralation between Baxter International and Spine Injury

Considering the 90-day investment horizon Baxter International is expected to under-perform the Spine Injury. In addition to that, Baxter International is 1.67 times more volatile than Spine Injury Solutions. It trades about -0.27 of its total potential returns per unit of risk. Spine Injury Solutions is currently generating about -0.09 per unit of volatility. If you would invest  3,183  in Spine Injury Solutions on October 10, 2024 and sell it today you would lose (49.00) from holding Spine Injury Solutions or give up 1.54% of portfolio value over 90 days.

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

Baxter International  vs.  Spine Injury Solutions

Baxter International

Risk-Adjusted Performance

0 of 100

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Spine Injury Solutions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spine Injury Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Spine Injury is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Baxter International and Spine Injury

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

The idea behind Baxter International and Spine Injury Solutions 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.