Correlation Between Becton Dickinson and Boston Scientific

Can any of the company-specific risk be diversified away by investing in both Becton Dickinson and Boston Scientific 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 Boston Scientific 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 Boston Scientific, you can compare the effects of market volatilities on Becton Dickinson and Boston Scientific 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 Boston Scientific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Becton Dickinson and Boston Scientific.

Diversification Opportunities for Becton Dickinson and Boston Scientific

0.61

Correlation Coefficient

Becton Dickinson  Boston Scientific

Poor diversification

The 3 months correlation between Becton and Boston is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Becton Dickinson and and Boston Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Scientific 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 Boston Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Scientific has no effect on the direction of Becton Dickinson i.e., Becton Dickinson and Boston Scientific go up and down completely randomly.

Pair Corralation between Becton Dickinson and Boston Scientific

Assuming the 90 days horizon Becton Dickinson is expected to generate 2.37 times less return on investment than Boston Scientific. But when comparing it to its historical volatility, Becton Dickinson and is 1.31 times less risky than Boston Scientific. It trades about 0.07 of its potential returns per unit of risk. Boston Scientific is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,700  in Boston Scientific on November 28, 2024 and sell it today you would earn a total of  1,200  from holding Boston Scientific or generate 13.79% return on investment over 90 days.

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

Becton Dickinson and  vs.  Boston Scientific

Becton Dickinson

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Becton Dickinson and are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Becton Dickinson is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Boston Scientific

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Boston Scientific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Becton Dickinson and Boston Scientific

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

The idea behind Becton Dickinson and and Boston Scientific 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.