Correlation Between Stryker and Siemens Healthineers

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

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

Diversification Opportunities for Stryker and Siemens Healthineers

0.47

Correlation Coefficient

Stryker  Siemens Healthineers

Very weak diversification

The 3 months correlation between Stryker and Siemens is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and Siemens Healthineers AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Healthineers 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 Siemens Healthineers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Healthineers has no effect on the direction of Stryker i.e., Stryker and Siemens Healthineers go up and down completely randomly.

Pair Corralation between Stryker and Siemens Healthineers

Considering the 90-day investment horizon Stryker is expected to generate 1.94 times less return on investment than Siemens Healthineers. But when comparing it to its historical volatility, Stryker is 2.94 times less risky than Siemens Healthineers. It trades about 0.05 of its potential returns per unit of risk. Siemens Healthineers AG is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,407  in Siemens Healthineers AG on December 3, 2024 and sell it today you would earn a total of  61.00  from holding Siemens Healthineers AG or generate 1.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Stryker  vs.  Siemens Healthineers AG

Stryker

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 1 (%) 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.

Siemens Healthineers

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Healthineers AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Siemens Healthineers is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Stryker and Siemens Healthineers

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

The idea behind Stryker and Siemens Healthineers AG 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.