Correlation Between Stryker and Becton Dickinson

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

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

Diversification Opportunities for Stryker and Becton Dickinson

0.57

Correlation Coefficient

Stryker  Becton Dickinson

Very weak diversification

The 3 months correlation between Stryker and Becton is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and Becton Dickinson and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Becton Dickinson and Stryker 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 Stryker are associated (or correlated) with Becton Dickinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Becton Dickinson has no effect on the direction of Stryker i.e., Stryker and Becton Dickinson go up and down completely randomly.

Pair Corralation between Stryker and Becton Dickinson

Assuming the 90 days horizon Stryker is expected to under-perform the Becton Dickinson. But the stock apears to be less risky and, when comparing its historical volatility, Stryker is 1.15 times less risky than Becton Dickinson. The stock trades about -0.01 of its potential returns per unit of risk. The Becton Dickinson and is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  21,590  in Becton Dickinson and on December 22, 2024 and sell it today you would lose (180.00) from holding Becton Dickinson and or give up 0.83% of portfolio value over 90 days.

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

Stryker  vs.  Becton Dickinson and

Stryker

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stryker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Stryker is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Becton Dickinson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Becton Dickinson and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Becton Dickinson is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Stryker and Becton Dickinson

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

The idea behind Stryker and Becton Dickinson and 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.