Correlation Between Siemens Healthineers and Zimmer Biomet

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

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

Diversification Opportunities for Siemens Healthineers and Zimmer Biomet

-0.05

Correlation Coefficient

Siemens Healthineers  Zimmer Biomet

Good diversification

The 3 months correlation between Siemens and Zimmer is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Healthineers AG 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 Siemens Healthineers 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 Siemens Healthineers AG 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 Siemens Healthineers i.e., Siemens Healthineers and Zimmer Biomet go up and down completely randomly.

Pair Corralation between Siemens Healthineers and Zimmer Biomet

Assuming the 90 days trading horizon Siemens Healthineers AG is expected to under-perform the Zimmer Biomet. But the stock apears to be less risky and, when comparing its historical volatility, Siemens Healthineers AG is 1.08 times less risky than Zimmer Biomet. The stock trades about -0.01 of its potential returns per unit of risk. The Zimmer Biomet Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10,005  in Zimmer Biomet Holdings on September 29, 2024 and sell it today you would earn a total of  245.00  from holding Zimmer Biomet Holdings or generate 2.45% return on investment over 90 days.

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

Siemens Healthineers AG  vs.  Zimmer Biomet Holdings

Siemens Healthineers

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zimmer Biomet Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zimmer Biomet Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Zimmer Biomet is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Siemens Healthineers and Zimmer Biomet

The main advantage of trading using opposite Siemens Healthineers and Zimmer Biomet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens Healthineers 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 Siemens Healthineers AG 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..