Correlation Between STRYKER and Saipem SpA

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

By analyzing existing cross correlation between STRYKER P 35 and Saipem SpA, you can compare the effects of market volatilities on STRYKER and Saipem SpA 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 Saipem SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of STRYKER and Saipem SpA.

Diversification Opportunities for STRYKER and Saipem SpA

-0.01

Correlation Coefficient

STRYKER  Saipem SpA

Good diversification

The 3 months correlation between STRYKER and Saipem is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding STRYKER P 35 and Saipem SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saipem SpA 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 P 35 are associated (or correlated) with Saipem SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saipem SpA has no effect on the direction of STRYKER i.e., STRYKER and Saipem SpA go up and down completely randomly.

Pair Corralation between STRYKER and Saipem SpA

Assuming the 90 days trading horizon STRYKER P 35 is expected to generate 0.13 times more return on investment than Saipem SpA. However, STRYKER P 35 is 7.88 times less risky than Saipem SpA. It trades about -0.04 of its potential returns per unit of risk. Saipem SpA is currently generating about -0.04 per unit of risk. If you would invest  9,845  in STRYKER P 35 on December 29, 2024 and sell it today you would lose (78.00) from holding STRYKER P 35 or give up 0.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

STRYKER P 35  vs.  Saipem SpA

STRYKER P 35

Risk-Adjusted Performance

Very Weak

Over the last 90 days STRYKER P 35 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, STRYKER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Saipem SpA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Saipem SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Saipem SpA 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 Saipem SpA

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

The idea behind STRYKER P 35 and Saipem SpA 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.