Correlation Between ZimVie and DexCom

Can any of the company-specific risk be diversified away by investing in both ZimVie and DexCom 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 ZimVie and DexCom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZimVie Inc and DexCom Inc, you can compare the effects of market volatilities on ZimVie and DexCom 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 ZimVie with a short position of DexCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZimVie and DexCom.

Diversification Opportunities for ZimVie and DexCom

-0.55

Correlation Coefficient

ZimVie  DexCom

Excellent diversification

The 3 months correlation between ZimVie and DexCom is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding ZimVie Inc and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc and ZimVie 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 ZimVie Inc are associated (or correlated) with DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of ZimVie i.e., ZimVie and DexCom go up and down completely randomly.

Pair Corralation between ZimVie and DexCom

Given the investment horizon of 90 days ZimVie Inc is expected to under-perform the DexCom. But the stock apears to be less risky and, when comparing its historical volatility, ZimVie Inc is 1.05 times less risky than DexCom. The stock trades about -0.13 of its potential returns per unit of risk. The DexCom Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,236  in DexCom Inc on August 31, 2024 and sell it today you would earn a total of  574.00  from holding DexCom Inc or generate 7.93% return on investment over 90 days.

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

ZimVie Inc  vs.  DexCom Inc

ZimVie Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZimVie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

DexCom Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, DexCom may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with ZimVie and DexCom

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

The idea behind ZimVie Inc and DexCom Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.