Correlation Between Medtronic PLC and CryoLife

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

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

Diversification Opportunities for Medtronic PLC and CryoLife

-0.16

Correlation Coefficient

Medtronic PLC  CryoLife

Good diversification

The 3 months correlation between Medtronic and CryoLife is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Medtronic PLC and CryoLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CryoLife and Medtronic PLC 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 Medtronic PLC are associated (or correlated) with CryoLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CryoLife has no effect on the direction of Medtronic PLC i.e., Medtronic PLC and CryoLife go up and down completely randomly.

Pair Corralation between Medtronic PLC and CryoLife

Assuming the 90 days horizon Medtronic PLC is expected to under-perform the CryoLife. But the stock apears to be less risky and, when comparing its historical volatility, Medtronic PLC is 1.77 times less risky than CryoLife. The stock trades about -0.05 of its potential returns per unit of risk. The CryoLife is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,250  in CryoLife on September 22, 2024 and sell it today you would earn a total of  415.00  from holding CryoLife or generate 18.44% return on investment over 90 days.

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

Medtronic PLC  vs.  CryoLife

Medtronic PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medtronic PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Medtronic PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CryoLife

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CryoLife are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CryoLife reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medtronic PLC and CryoLife

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

The idea behind Medtronic PLC and CryoLife 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.