Correlation Between Becton Dickinson and ResMed

Can any of the company-specific risk be diversified away by investing in both Becton Dickinson and ResMed 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 ResMed 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 ResMed Inc, you can compare the effects of market volatilities on Becton Dickinson and ResMed 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 ResMed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Becton Dickinson and ResMed.

Diversification Opportunities for Becton Dickinson and ResMed

-0.05

Correlation Coefficient

Becton Dickinson  ResMed

Good diversification

The 3 months correlation between Becton and ResMed is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Becton Dickinson and and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc 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 ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Becton Dickinson i.e., Becton Dickinson and ResMed go up and down completely randomly.

Pair Corralation between Becton Dickinson and ResMed

Assuming the 90 days horizon Becton Dickinson is expected to generate 2.36 times less return on investment than ResMed. But when comparing it to its historical volatility, Becton Dickinson and is 1.1 times less risky than ResMed. It trades about 0.01 of its potential returns per unit of risk. ResMed Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  22,667  in ResMed Inc on September 12, 2024 and sell it today you would earn a total of  303.00  from holding ResMed Inc or generate 1.34% return on investment over 90 days.

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

Becton Dickinson and  vs.  ResMed Inc

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. Despite nearly stable basic indicators, Becton Dickinson is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ResMed Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ResMed 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 ResMed

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

The idea behind Becton Dickinson and and ResMed 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.