Correlation Between Stryker and Integra LifeSciences

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

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

Diversification Opportunities for Stryker and Integra LifeSciences

0.79

Correlation Coefficient

Stryker  Integra LifeSciences

Poor diversification

The 3 months correlation between Stryker and Integra is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and Integra LifeSciences Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integra LifeSciences 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 Integra LifeSciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integra LifeSciences has no effect on the direction of Stryker i.e., Stryker and Integra LifeSciences go up and down completely randomly.

Pair Corralation between Stryker and Integra LifeSciences

Considering the 90-day investment horizon Stryker is expected to under-perform the Integra LifeSciences. But the stock apears to be less risky and, when comparing its historical volatility, Stryker is 1.64 times less risky than Integra LifeSciences. The stock trades about -0.27 of its potential returns per unit of risk. The Integra LifeSciences Holdings is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  2,300  in Integra LifeSciences Holdings on September 22, 2024 and sell it today you would lose (120.00) from holding Integra LifeSciences Holdings or give up 5.22% of portfolio value over 90 days.

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

Stryker  vs.  Integra LifeSciences Holdings

Stryker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stryker has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Integra LifeSciences

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Integra LifeSciences Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Integra LifeSciences unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stryker and Integra LifeSciences

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

The idea behind Stryker and Integra LifeSciences 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.