Correlation Between Becton Dickinson and Innovative Eyewear

Can any of the company-specific risk be diversified away by investing in both Becton Dickinson 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 Becton Dickinson and Innovative Eyewear into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Becton Dickinson and and Innovative Eyewear, you can compare the effects of market volatilities on Becton Dickinson 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 Becton Dickinson with a short position of Innovative Eyewear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Becton Dickinson and Innovative Eyewear.

Diversification Opportunities for Becton Dickinson and Innovative Eyewear

0.03

Correlation Coefficient

Becton Dickinson  Innovative Eyewear

Significant diversification

The 3 months correlation between Becton and Innovative is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Becton Dickinson and and Innovative Eyewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Eyewear and Becton Dickinson 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 Becton Dickinson and 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 Becton Dickinson i.e., Becton Dickinson and Innovative Eyewear go up and down completely randomly.

Pair Corralation between Becton Dickinson and Innovative Eyewear

Considering the 90-day investment horizon Becton Dickinson and is expected to under-perform the Innovative Eyewear. But the stock apears to be less risky and, when comparing its historical volatility, Becton Dickinson and is 7.67 times less risky than Innovative Eyewear. The stock trades about -0.11 of its potential returns per unit of risk. The Innovative Eyewear is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  449.00  in Innovative Eyewear on August 31, 2024 and sell it today you would earn a total of  218.00  from holding Innovative Eyewear or generate 48.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Becton Dickinson and  vs.  Innovative Eyewear

Becton Dickinson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Becton Dickinson and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Innovative Eyewear

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Eyewear are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Innovative Eyewear showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Becton Dickinson and Innovative Eyewear

The main advantage of trading using opposite Becton Dickinson and Innovative Eyewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Becton Dickinson 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.

The idea behind Becton Dickinson and and Innovative Eyewear 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.