Correlation Between Zimmer Biomet and Uber Technologies

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

Diversification Opportunities for Zimmer Biomet and Uber Technologies

-0.51

Correlation Coefficient

Zimmer Biomet  Uber Technologies

Excellent diversification

The 3 months correlation between Zimmer and Uber is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Zimmer Biomet Holdings and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Zimmer Biomet i.e., Zimmer Biomet and Uber Technologies go up and down completely randomly.

Pair Corralation between Zimmer Biomet and Uber Technologies

Assuming the 90 days horizon Zimmer Biomet is expected to generate 42.51 times less return on investment than Uber Technologies. But when comparing it to its historical volatility, Zimmer Biomet Holdings is 1.72 times less risky than Uber Technologies. It trades about 0.01 of its potential returns per unit of risk. Uber Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,832  in Uber Technologies on December 25, 2024 and sell it today you would earn a total of  1,223  from holding Uber Technologies or generate 20.97% return on investment over 90 days.

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

Zimmer Biomet Holdings  vs.  Uber Technologies

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 nearly stable basic indicators, Zimmer Biomet is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Uber Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Uber Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zimmer Biomet and Uber Technologies

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

The idea behind Zimmer Biomet Holdings and Uber Technologies 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.