Correlation Between Integra LifeSciences and ICU Medical

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

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

Diversification Opportunities for Integra LifeSciences and ICU Medical

0.51

Correlation Coefficient

Integra LifeSciences  ICU Medical

Very weak diversification

The 3 months correlation between Integra and ICU is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Integra LifeSciences Holdings and ICU Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICU Medical and Integra LifeSciences 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 Integra LifeSciences Holdings are associated (or correlated) with ICU Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICU Medical has no effect on the direction of Integra LifeSciences i.e., Integra LifeSciences and ICU Medical go up and down completely randomly.

Pair Corralation between Integra LifeSciences and ICU Medical

Given the investment horizon of 90 days Integra LifeSciences Holdings is expected to generate 1.31 times more return on investment than ICU Medical. However, Integra LifeSciences is 1.31 times more volatile than ICU Medical. It trades about -0.01 of its potential returns per unit of risk. ICU Medical is currently generating about -0.03 per unit of risk. If you would invest  2,247  in Integra LifeSciences Holdings on December 28, 2024 and sell it today you would lose (101.00) from holding Integra LifeSciences Holdings or give up 4.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Integra LifeSciences Holdings  vs.  ICU Medical

Integra LifeSciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Integra LifeSciences Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Integra LifeSciences is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

ICU Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days ICU Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ICU Medical is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Integra LifeSciences and ICU Medical

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

The idea behind Integra LifeSciences Holdings and ICU Medical 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.