Correlation Between Si Bone and Zimmer Biomet

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

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

Diversification Opportunities for Si Bone and Zimmer Biomet

0.25

Correlation Coefficient

Si Bone  Zimmer Biomet

Modest diversification

The 3 months correlation between SIBN and Zimmer is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Si Bone 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 Si Bone 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 Si Bone 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 Si Bone i.e., Si Bone and Zimmer Biomet go up and down completely randomly.

Pair Corralation between Si Bone and Zimmer Biomet

Given the investment horizon of 90 days Si Bone is expected to under-perform the Zimmer Biomet. In addition to that, Si Bone is 2.3 times more volatile than Zimmer Biomet Holdings. It trades about -0.05 of its total potential returns per unit of risk. Zimmer Biomet Holdings is currently generating about -0.02 per unit of volatility. If you would invest  11,591  in Zimmer Biomet Holdings on September 3, 2024 and sell it today you would lose (381.00) from holding Zimmer Biomet Holdings or give up 3.29% of portfolio value over 90 days.

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

Si Bone  vs.  Zimmer Biomet Holdings

Si Bone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Si Bone has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Zimmer Biomet Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zimmer Biomet Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Zimmer Biomet is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Si Bone and Zimmer Biomet

The main advantage of trading using opposite Si Bone and Zimmer Biomet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Si Bone 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 Si Bone 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.