Correlation Between Zimmer Biomet and Packaging Corp

Can any of the company-specific risk be diversified away by investing in both Zimmer Biomet and Packaging Corp 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 Packaging Corp 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 Packaging Corp of, you can compare the effects of market volatilities on Zimmer Biomet and Packaging Corp 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 Packaging Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zimmer Biomet and Packaging Corp.

Diversification Opportunities for Zimmer Biomet and Packaging Corp

0.01

Correlation Coefficient

Zimmer Biomet  Packaging Corp

Significant diversification

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

Pair Corralation between Zimmer Biomet and Packaging Corp

Considering the 90-day investment horizon Zimmer Biomet Holdings is expected to generate 0.84 times more return on investment than Packaging Corp. However, Zimmer Biomet Holdings is 1.2 times less risky than Packaging Corp. It trades about 0.07 of its potential returns per unit of risk. Packaging Corp of is currently generating about -0.1 per unit of risk. If you would invest  10,540  in Zimmer Biomet Holdings on December 29, 2024 and sell it today you would earn a total of  675.00  from holding Zimmer Biomet Holdings or generate 6.4% return on investment over 90 days.

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

Zimmer Biomet Holdings  vs.  Packaging Corp of

Zimmer Biomet Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zimmer Biomet Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Zimmer Biomet may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Packaging Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Packaging Corp of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Zimmer Biomet and Packaging Corp

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

The idea behind Zimmer Biomet Holdings and Packaging Corp of 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.