Correlation Between Nasdaq and Zimmer Biomet

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

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

Diversification Opportunities for Nasdaq and Zimmer Biomet

0.93

Correlation Coefficient

Nasdaq  Zimmer Biomet

Almost no diversification

The 3 months correlation between Nasdaq and Zimmer is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Zimmer Biomet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimmer Biomet Holdings and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Zimmer Biomet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimmer Biomet Holdings has no effect on the direction of Nasdaq i.e., Nasdaq and Zimmer Biomet go up and down completely randomly.

Pair Corralation between Nasdaq and Zimmer Biomet

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Zimmer Biomet. In addition to that, Nasdaq is 1.13 times more volatile than Zimmer Biomet Holdings. It trades about -0.18 of its total potential returns per unit of risk. Zimmer Biomet Holdings is currently generating about -0.08 per unit of volatility. If you would invest  10,315  in Zimmer Biomet Holdings on September 23, 2024 and sell it today you would lose (170.00) from holding Zimmer Biomet Holdings or give up 1.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Nasdaq Inc  vs.  Zimmer Biomet Holdings

Nasdaq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Zimmer Biomet Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zimmer Biomet Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zimmer Biomet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and Zimmer Biomet

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

The idea behind Nasdaq Inc and Zimmer Biomet Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.