Correlation Between Stryker and TruBridge

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

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

Diversification Opportunities for Stryker and TruBridge

0.3

Correlation Coefficient

Stryker  TruBridge

Weak diversification

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

Pair Corralation between Stryker and TruBridge

Considering the 90-day investment horizon Stryker is expected to generate 43.11 times less return on investment than TruBridge. But when comparing it to its historical volatility, Stryker is 2.1 times less risky than TruBridge. It trades about 0.01 of its potential returns per unit of risk. TruBridge is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,922  in TruBridge on December 27, 2024 and sell it today you would earn a total of  848.00  from holding TruBridge or generate 44.12% return on investment over 90 days.

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

Stryker  vs.  TruBridge

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 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.

TruBridge

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TruBridge are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TruBridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stryker and TruBridge

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

The idea behind Stryker and TruBridge 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.