Correlation Between CONMED and Smith Nephew

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

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

Diversification Opportunities for CONMED and Smith Nephew

-0.14

Correlation Coefficient

CONMED  Smith Nephew

Good diversification

The 3 months correlation between CONMED and Smith is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding CONMED and Smith Nephew SNATS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew SNATS and CONMED 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 CONMED are associated (or correlated) with Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew SNATS has no effect on the direction of CONMED i.e., CONMED and Smith Nephew go up and down completely randomly.

Pair Corralation between CONMED and Smith Nephew

Given the investment horizon of 90 days CONMED is expected to generate 1.18 times more return on investment than Smith Nephew. However, CONMED is 1.18 times more volatile than Smith Nephew SNATS. It trades about 0.05 of its potential returns per unit of risk. Smith Nephew SNATS is currently generating about -0.12 per unit of risk. If you would invest  7,114  in CONMED on September 4, 2024 and sell it today you would earn a total of  482.00  from holding CONMED or generate 6.78% return on investment over 90 days.

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

CONMED  vs.  Smith Nephew SNATS

CONMED

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CONMED are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, CONMED may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Smith Nephew SNATS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith Nephew SNATS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CONMED and Smith Nephew

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

The idea behind CONMED and Smith Nephew SNATS 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.