Correlation Between ICU Medical and BioLife Solutions

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

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

Diversification Opportunities for ICU Medical and BioLife Solutions

-0.24

Correlation Coefficient

ICU Medical  BioLife Solutions

Very good diversification

The 3 months correlation between ICU and BioLife is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ICU Medical and BioLife Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLife Solutions and ICU Medical 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 ICU Medical are associated (or correlated) with BioLife Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLife Solutions has no effect on the direction of ICU Medical i.e., ICU Medical and BioLife Solutions go up and down completely randomly.

Pair Corralation between ICU Medical and BioLife Solutions

Given the investment horizon of 90 days ICU Medical is expected to generate 10.89 times less return on investment than BioLife Solutions. But when comparing it to its historical volatility, ICU Medical is 2.16 times less risky than BioLife Solutions. It trades about 0.01 of its potential returns per unit of risk. BioLife Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,443  in BioLife Solutions on September 1, 2024 and sell it today you would earn a total of  304.00  from holding BioLife Solutions or generate 12.44% return on investment over 90 days.

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

ICU Medical  vs.  BioLife Solutions

ICU Medical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICU Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, ICU Medical is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

BioLife Solutions

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BioLife Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, BioLife Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICU Medical and BioLife Solutions

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

The idea behind ICU Medical and BioLife Solutions 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.