Correlation Between Boston Scientific and Stryker

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

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

Diversification Opportunities for Boston Scientific and Stryker

0.88

Correlation Coefficient

Boston Scientific  Stryker

Very poor diversification

The 3 months correlation between Boston and Stryker is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Boston Scientific and Stryker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stryker and Boston Scientific 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 Boston Scientific are associated (or correlated) with Stryker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stryker has no effect on the direction of Boston Scientific i.e., Boston Scientific and Stryker go up and down completely randomly.

Pair Corralation between Boston Scientific and Stryker

Assuming the 90 days horizon Boston Scientific is expected to generate 0.88 times more return on investment than Stryker. However, Boston Scientific is 1.14 times less risky than Stryker. It trades about 0.15 of its potential returns per unit of risk. Stryker is currently generating about 0.04 per unit of risk. If you would invest  7,750  in Boston Scientific on September 23, 2024 and sell it today you would earn a total of  750.00  from holding Boston Scientific or generate 9.68% return on investment over 90 days.

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

Boston Scientific  vs.  Stryker

Boston Scientific

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Boston Scientific may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Stryker

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Stryker is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Boston Scientific and Stryker

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

The idea behind Boston Scientific and Stryker 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.