Correlation Between Zimmer Biomet and COLUMBIA SPORTSWEAR

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

Diversification Opportunities for Zimmer Biomet and COLUMBIA SPORTSWEAR

0.71

Correlation Coefficient

Zimmer Biomet  COLUMBIA SPORTSWEAR

Poor diversification

The 3 months correlation between Zimmer and COLUMBIA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Zimmer Biomet Holdings and COLUMBIA SPORTSWEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COLUMBIA SPORTSWEAR has no effect on the direction of Zimmer Biomet i.e., Zimmer Biomet and COLUMBIA SPORTSWEAR go up and down completely randomly.

Pair Corralation between Zimmer Biomet and COLUMBIA SPORTSWEAR

Assuming the 90 days trading horizon Zimmer Biomet Holdings is expected to generate 0.75 times more return on investment than COLUMBIA SPORTSWEAR. However, Zimmer Biomet Holdings is 1.33 times less risky than COLUMBIA SPORTSWEAR. It trades about -0.21 of its potential returns per unit of risk. COLUMBIA SPORTSWEAR is currently generating about -0.25 per unit of risk. If you would invest  10,156  in Zimmer Biomet Holdings on October 9, 2024 and sell it today you would lose (268.00) from holding Zimmer Biomet Holdings or give up 2.64% of portfolio value over 90 days.

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

Zimmer Biomet Holdings  vs.  COLUMBIA SPORTSWEAR

Zimmer Biomet Holdings

Risk-Adjusted Performance

5 of 100

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. In spite of comparatively stable basic indicators, Zimmer Biomet is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

COLUMBIA SPORTSWEAR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COLUMBIA SPORTSWEAR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, COLUMBIA SPORTSWEAR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Zimmer Biomet and COLUMBIA SPORTSWEAR

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

The idea behind Zimmer Biomet Holdings and COLUMBIA SPORTSWEAR 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.