Correlation Between SurModics and Zimmer Biomet

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

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

Diversification Opportunities for SurModics and Zimmer Biomet

0.4

Correlation Coefficient

SurModics  Zimmer Biomet

Very weak diversification

The 3 months correlation between SurModics and Zimmer is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SurModics 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 SurModics 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 SurModics 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 SurModics i.e., SurModics and Zimmer Biomet go up and down completely randomly.

Pair Corralation between SurModics and Zimmer Biomet

Given the investment horizon of 90 days SurModics is expected to under-perform the Zimmer Biomet. In addition to that, SurModics is 1.24 times more volatile than Zimmer Biomet Holdings. It trades about -0.11 of its total potential returns per unit of risk. Zimmer Biomet Holdings is currently generating about -0.09 per unit of volatility. If you would invest  11,185  in Zimmer Biomet Holdings on November 28, 2024 and sell it today you would lose (761.00) from holding Zimmer Biomet Holdings or give up 6.8% of portfolio value over 90 days.

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

SurModics  vs.  Zimmer Biomet Holdings

SurModics

Risk-Adjusted Performance

Very Weak

Over the last 90 days SurModics 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Zimmer Biomet Holdings

Risk-Adjusted Performance

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 latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with SurModics and Zimmer Biomet

The main advantage of trading using opposite SurModics and Zimmer Biomet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SurModics 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 SurModics 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.