Correlation Between Zimmer Biomet and Orthofix Medical

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

By analyzing existing cross correlation between Zimmer Biomet Holdings and Orthofix Medical, you can compare the effects of market volatilities on Zimmer Biomet and Orthofix Medical 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 Zimmer Biomet with a short position of Orthofix Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zimmer Biomet and Orthofix Medical.

Diversification Opportunities for Zimmer Biomet and Orthofix Medical

0.28

Correlation Coefficient

Zimmer Biomet  Orthofix Medical

Modest diversification

The 3 months correlation between Zimmer and Orthofix is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Zimmer Biomet Holdings and Orthofix Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orthofix Medical and Zimmer Biomet 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 Zimmer Biomet Holdings are associated (or correlated) with Orthofix Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orthofix Medical has no effect on the direction of Zimmer Biomet i.e., Zimmer Biomet and Orthofix Medical go up and down completely randomly.

Pair Corralation between Zimmer Biomet and Orthofix Medical

Considering the 90-day investment horizon Zimmer Biomet Holdings is expected to generate 0.87 times more return on investment than Orthofix Medical. However, Zimmer Biomet Holdings is 1.15 times less risky than Orthofix Medical. It trades about -0.09 of its potential returns per unit of risk. Orthofix Medical is currently generating about -0.14 per unit of risk. If you would invest  11,185  in Zimmer Biomet Holdings on November 28, 2024 and sell it today you would lose (761.00) from holding Zimmer Biomet Holdings or give up 6.8% of portfolio value over 90 days.

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

Zimmer Biomet Holdings  vs.  Orthofix Medical

Zimmer Biomet Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zimmer Biomet Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Orthofix Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orthofix Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zimmer Biomet and Orthofix Medical

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

The idea behind Zimmer Biomet Holdings and Orthofix Medical 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 CEOs Directory module to screen CEOs from public companies around the world.