Correlation Between Zimmer Biomet and BORR DRILLING

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

Diversification Opportunities for Zimmer Biomet and BORR DRILLING

-0.84

Correlation Coefficient

Zimmer Biomet  BORR DRILLING

Pay attention - limited upside

The 3 months correlation between Zimmer and BORR is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Zimmer Biomet Holdings and BORR DRILLING NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BORR DRILLING NEW 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 BORR DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BORR DRILLING NEW has no effect on the direction of Zimmer Biomet i.e., Zimmer Biomet and BORR DRILLING go up and down completely randomly.

Pair Corralation between Zimmer Biomet and BORR DRILLING

Assuming the 90 days horizon Zimmer Biomet Holdings is expected to generate 0.45 times more return on investment than BORR DRILLING. However, Zimmer Biomet Holdings is 2.22 times less risky than BORR DRILLING. It trades about 0.01 of its potential returns per unit of risk. BORR DRILLING NEW is currently generating about -0.08 per unit of risk. If you would invest  10,086  in Zimmer Biomet Holdings on September 23, 2024 and sell it today you would earn a total of  59.00  from holding Zimmer Biomet Holdings or generate 0.58% return on investment over 90 days.

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

Zimmer Biomet Holdings  vs.  BORR DRILLING NEW

Zimmer Biomet Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zimmer Biomet Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zimmer Biomet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BORR DRILLING NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BORR DRILLING NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Zimmer Biomet and BORR DRILLING

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

The idea behind Zimmer Biomet Holdings and BORR DRILLING NEW 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.