Correlation Between Stryker and Boston Scientific

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

By analyzing existing cross correlation between Stryker and Boston Scientific, you can compare the effects of market volatilities on Stryker and Boston Scientific 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 Boston Scientific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stryker and Boston Scientific.

Diversification Opportunities for Stryker and Boston Scientific

0.61

Correlation Coefficient

Stryker  Boston Scientific

Poor diversification

The 3 months correlation between Stryker and Boston is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and Boston Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Scientific 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 Boston Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Scientific has no effect on the direction of Stryker i.e., Stryker and Boston Scientific go up and down completely randomly.

Pair Corralation between Stryker and Boston Scientific

Assuming the 90 days horizon Stryker is expected to under-perform the Boston Scientific. But the stock apears to be less risky and, when comparing its historical volatility, Stryker is 1.64 times less risky than Boston Scientific. The stock trades about -0.01 of its potential returns per unit of risk. The Boston Scientific is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,850  in Boston Scientific on November 19, 2024 and sell it today you would earn a total of  150.00  from holding Boston Scientific or generate 1.52% return on investment over 90 days.

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

Stryker  vs.  Boston Scientific

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.

Boston Scientific

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Boston Scientific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stryker and Boston Scientific

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

The idea behind Stryker and Boston Scientific 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.