Correlation Between Boston Scientific and Nihon Kohden

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

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

Diversification Opportunities for Boston Scientific and Nihon Kohden

-0.49

Correlation Coefficient

Boston Scientific  Nihon Kohden

Very good diversification

The 3 months correlation between Boston and Nihon is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Boston Scientific Corp and Nihon Kohden Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nihon Kohden Corp 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 Corp are associated (or correlated) with Nihon Kohden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nihon Kohden Corp has no effect on the direction of Boston Scientific i.e., Boston Scientific and Nihon Kohden go up and down completely randomly.

Pair Corralation between Boston Scientific and Nihon Kohden

Considering the 90-day investment horizon Boston Scientific Corp is expected to generate 0.21 times more return on investment than Nihon Kohden. However, Boston Scientific Corp is 4.72 times less risky than Nihon Kohden. It trades about 0.12 of its potential returns per unit of risk. Nihon Kohden Corp is currently generating about -0.01 per unit of risk. If you would invest  8,380  in Boston Scientific Corp on September 30, 2024 and sell it today you would earn a total of  686.00  from holding Boston Scientific Corp or generate 8.19% return on investment over 90 days.

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

Boston Scientific Corp  vs.  Nihon Kohden Corp

Boston Scientific Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Boston Scientific may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nihon Kohden Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nihon Kohden Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Nihon Kohden is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boston Scientific and Nihon Kohden

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

The idea behind Boston Scientific Corp and Nihon Kohden Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.