Correlation Between Becton Dickinson and Coloplast

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

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

Diversification Opportunities for Becton Dickinson and Coloplast

0.24

Correlation Coefficient

Becton Dickinson  Coloplast

Modest diversification

The 3 months correlation between Becton and Coloplast is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Becton Dickinson and and Coloplast AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast AS and Becton Dickinson 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 Becton Dickinson and are associated (or correlated) with Coloplast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast AS has no effect on the direction of Becton Dickinson i.e., Becton Dickinson and Coloplast go up and down completely randomly.

Pair Corralation between Becton Dickinson and Coloplast

Considering the 90-day investment horizon Becton Dickinson and is expected to under-perform the Coloplast. But the stock apears to be less risky and, when comparing its historical volatility, Becton Dickinson and is 1.44 times less risky than Coloplast. The stock trades about -0.11 of its potential returns per unit of risk. The Coloplast AS is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12,860  in Coloplast AS on September 1, 2024 and sell it today you would lose (3.00) from holding Coloplast AS or give up 0.02% of portfolio value over 90 days.

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

Becton Dickinson and  vs.  Coloplast AS

Becton Dickinson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Becton Dickinson and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Coloplast AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Becton Dickinson and Coloplast

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

The idea behind Becton Dickinson and and Coloplast AS 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.