Correlation Between STERIS Plc and Stryker

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

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

Diversification Opportunities for STERIS Plc and Stryker

-0.3

Correlation Coefficient

STERIS Plc  Stryker

Very good diversification

The 3 months correlation between STERIS and Stryker is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding STERIS plc and Stryker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stryker and STERIS 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 STERIS plc are associated (or correlated) with Stryker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stryker has no effect on the direction of STERIS Plc i.e., STERIS Plc and Stryker go up and down completely randomly.

Pair Corralation between STERIS Plc and Stryker

Considering the 90-day investment horizon STERIS Plc is expected to generate 4.27 times less return on investment than Stryker. In addition to that, STERIS Plc is 1.12 times more volatile than Stryker. It trades about 0.01 of its total potential returns per unit of risk. Stryker is currently generating about 0.06 per unit of volatility. If you would invest  25,136  in Stryker on October 7, 2024 and sell it today you would earn a total of  11,016  from holding Stryker or generate 43.83% return on investment over 90 days.

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

STERIS plc  vs.  Stryker

STERIS plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STERIS plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Stryker

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Stryker is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with STERIS Plc and Stryker

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

The idea behind STERIS plc and Stryker 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.