Correlation Between Medtronic PLC and BioLife Solutions

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

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

Diversification Opportunities for Medtronic PLC and BioLife Solutions

0.08

Correlation Coefficient

Medtronic PLC  BioLife Solutions

Significant diversification

The 3 months correlation between Medtronic and BioLife is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Medtronic PLC and BioLife Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLife Solutions and Medtronic PLC 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 Medtronic PLC are associated (or correlated) with BioLife Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLife Solutions has no effect on the direction of Medtronic PLC i.e., Medtronic PLC and BioLife Solutions go up and down completely randomly.

Pair Corralation between Medtronic PLC and BioLife Solutions

Considering the 90-day investment horizon Medtronic PLC is expected to generate 0.6 times more return on investment than BioLife Solutions. However, Medtronic PLC is 1.65 times less risky than BioLife Solutions. It trades about 0.08 of its potential returns per unit of risk. BioLife Solutions is currently generating about -0.07 per unit of risk. If you would invest  8,580  in Medtronic PLC on December 2, 2024 and sell it today you would earn a total of  622.00  from holding Medtronic PLC or generate 7.25% return on investment over 90 days.

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

Medtronic PLC  vs.  BioLife Solutions

Medtronic PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medtronic PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Medtronic PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BioLife Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days BioLife Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Medtronic PLC and BioLife Solutions

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

The idea behind Medtronic PLC and BioLife Solutions 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.