Correlation Between Baxter International and Sharps Technology

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

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

Diversification Opportunities for Baxter International and Sharps Technology

0.65

Correlation Coefficient

Baxter International  Sharps Technology

Poor diversification

The 3 months correlation between Baxter and Sharps is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and Sharps Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharps Technology and Baxter International 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 Baxter International are associated (or correlated) with Sharps Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharps Technology has no effect on the direction of Baxter International i.e., Baxter International and Sharps Technology go up and down completely randomly.

Pair Corralation between Baxter International and Sharps Technology

Considering the 90-day investment horizon Baxter International is expected to generate 0.2 times more return on investment than Sharps Technology. However, Baxter International is 5.06 times less risky than Sharps Technology. It trades about -0.02 of its potential returns per unit of risk. Sharps Technology is currently generating about -0.03 per unit of risk. If you would invest  4,223  in Baxter International on September 7, 2024 and sell it today you would lose (1,043) from holding Baxter International or give up 24.7% of portfolio value over 90 days.

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

Baxter International  vs.  Sharps Technology

Baxter International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baxter International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sharps Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sharps Technology 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Baxter International and Sharps Technology

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

The idea behind Baxter International and Sharps Technology 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.