Correlation Between Boston Scientific and CryoLife

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

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

Diversification Opportunities for Boston Scientific and CryoLife

0.87

Correlation Coefficient

Boston Scientific  CryoLife

Very poor diversification

The 3 months correlation between Boston and CryoLife is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Boston Scientific and CryoLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CryoLife and Boston Scientific 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 Boston Scientific 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 Boston Scientific i.e., Boston Scientific and CryoLife go up and down completely randomly.

Pair Corralation between Boston Scientific and CryoLife

Assuming the 90 days horizon Boston Scientific is expected to generate 1.08 times less return on investment than CryoLife. But when comparing it to its historical volatility, Boston Scientific is 1.26 times less risky than CryoLife. It trades about 0.13 of its potential returns per unit of risk. CryoLife is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,620  in CryoLife on September 25, 2024 and sell it today you would earn a total of  1,095  from holding CryoLife or generate 67.59% return on investment over 90 days.

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

Boston Scientific  vs.  CryoLife

Boston Scientific

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Boston Scientific reported solid returns over the last few months and may actually be approaching a breakup point.

CryoLife

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CryoLife are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CryoLife reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Scientific and CryoLife

The main advantage of trading using opposite Boston Scientific and CryoLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Scientific 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 Boston Scientific 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.