Correlation Between Coloplast and Becton Dickinson

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

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

Diversification Opportunities for Coloplast and Becton Dickinson

0.33

Correlation Coefficient

Coloplast  Becton Dickinson

Weak diversification

The 3 months correlation between Coloplast and Becton is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Coloplast A and Becton Dickinson and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Becton Dickinson and Coloplast 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 Coloplast A are associated (or correlated) with Becton Dickinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Becton Dickinson has no effect on the direction of Coloplast i.e., Coloplast and Becton Dickinson go up and down completely randomly.

Pair Corralation between Coloplast and Becton Dickinson

Assuming the 90 days horizon Coloplast A is expected to under-perform the Becton Dickinson. In addition to that, Coloplast is 1.19 times more volatile than Becton Dickinson and. It trades about -0.09 of its total potential returns per unit of risk. Becton Dickinson and is currently generating about -0.11 per unit of volatility. If you would invest  24,119  in Becton Dickinson and on September 3, 2024 and sell it today you would lose (1,929) from holding Becton Dickinson and or give up 8.0% of portfolio value over 90 days.

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

Coloplast A  vs.  Becton Dickinson and

Coloplast A

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Coloplast and Becton Dickinson

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

The idea behind Coloplast A and Becton Dickinson and 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.