Correlation Between Medtronic PLC and Masimo

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

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

Diversification Opportunities for Medtronic PLC and Masimo

-0.64

Correlation Coefficient

Medtronic PLC  Masimo

Excellent diversification

The 3 months correlation between Medtronic and Masimo is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Medtronic PLC and Masimo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masimo 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 Masimo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masimo has no effect on the direction of Medtronic PLC i.e., Medtronic PLC and Masimo go up and down completely randomly.

Pair Corralation between Medtronic PLC and Masimo

Considering the 90-day investment horizon Medtronic PLC is expected to under-perform the Masimo. But the stock apears to be less risky and, when comparing its historical volatility, Medtronic PLC is 2.37 times less risky than Masimo. The stock trades about -0.12 of its potential returns per unit of risk. The Masimo is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  11,397  in Masimo on September 14, 2024 and sell it today you would earn a total of  6,193  from holding Masimo or generate 54.34% return on investment over 90 days.

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

Medtronic PLC  vs.  Masimo

Medtronic PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medtronic PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's 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.

Masimo

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Masimo are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Masimo demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medtronic PLC and Masimo

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

The idea behind Medtronic PLC and Masimo 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.