Correlation Between ICU Medical and Envista Holdings

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

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

Diversification Opportunities for ICU Medical and Envista Holdings

0.74

Correlation Coefficient

ICU Medical  Envista Holdings

Poor diversification

The 3 months correlation between ICU and Envista is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ICU Medical and Envista Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Envista Holdings Corp and ICU Medical 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 ICU Medical are associated (or correlated) with Envista Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Envista Holdings Corp has no effect on the direction of ICU Medical i.e., ICU Medical and Envista Holdings go up and down completely randomly.

Pair Corralation between ICU Medical and Envista Holdings

Given the investment horizon of 90 days ICU Medical is expected to under-perform the Envista Holdings. But the stock apears to be less risky and, when comparing its historical volatility, ICU Medical is 1.02 times less risky than Envista Holdings. The stock trades about -0.03 of its potential returns per unit of risk. The Envista Holdings Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,911  in Envista Holdings Corp on December 28, 2024 and sell it today you would lose (108.00) from holding Envista Holdings Corp or give up 5.65% of portfolio value over 90 days.

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

ICU Medical  vs.  Envista Holdings Corp

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.

Envista Holdings Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ICU Medical and Envista Holdings

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

The idea behind ICU Medical and Envista Holdings Corp 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.