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
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baxter and Sharps is 0.63. 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 4.93 times less risky than Sharps Technology. It trades about -0.03 of its potential returns per unit of risk. Sharps Technology is currently generating about -0.02 per unit of risk. If you would invest 4,693 in Baxter International on September 6, 2024 and sell it today you would lose (1,391) from holding Baxter International or give up 29.64% 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
Performance |
Timeline |
Baxter International |
Sharps Technology |
Baxter International and Sharps Technology Volatility Contrast
Predicted Return Density |
Returns |
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.Baxter International vs. West Pharmaceutical Services | Baxter International vs. ResMed Inc | Baxter International vs. ICU Medical | Baxter International vs. AptarGroup |
Sharps Technology vs. West Pharmaceutical Services | Sharps Technology vs. ResMed Inc | Sharps Technology vs. ICU Medical | Sharps Technology vs. AptarGroup |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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