Correlation Between Zimmer Biomet and Stryker

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

Diversification Opportunities for Zimmer Biomet and Stryker

0.93

Correlation Coefficient

Zimmer Biomet  Stryker

Almost no diversification

The 3 months correlation between Zimmer and Stryker is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Zimmer Biomet Holdings and Stryker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stryker 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 Stryker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stryker has no effect on the direction of Zimmer Biomet i.e., Zimmer Biomet and Stryker go up and down completely randomly.

Pair Corralation between Zimmer Biomet and Stryker

Assuming the 90 days horizon Zimmer Biomet Holdings is expected to under-perform the Stryker. In addition to that, Zimmer Biomet is 1.1 times more volatile than Stryker. It trades about -0.01 of its total potential returns per unit of risk. Stryker is currently generating about 0.07 per unit of volatility. If you would invest  24,279  in Stryker on October 5, 2024 and sell it today you would earn a total of  10,611  from holding Stryker or generate 43.7% return on investment over 90 days.

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

Zimmer Biomet Holdings  vs.  Stryker

Zimmer Biomet Holdings

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Zimmer Biomet Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Zimmer Biomet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Stryker

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Stryker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Stryker may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Zimmer Biomet and Stryker

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

The idea behind Zimmer Biomet Holdings and Stryker 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.