Correlation Between Koninklijke Philips and Stryker

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

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

Diversification Opportunities for Koninklijke Philips and Stryker

-0.77

Correlation Coefficient

Koninklijke Philips  Stryker

Pay attention - limited upside

The 3 months correlation between Koninklijke and Stryker is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and Stryker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stryker and Koninklijke Philips 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 Koninklijke Philips NV are associated (or correlated) with Stryker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stryker has no effect on the direction of Koninklijke Philips i.e., Koninklijke Philips and Stryker go up and down completely randomly.

Pair Corralation between Koninklijke Philips and Stryker

Considering the 90-day investment horizon Koninklijke Philips NV is expected to under-perform the Stryker. But the stock apears to be less risky and, when comparing its historical volatility, Koninklijke Philips NV is 1.05 times less risky than Stryker. The stock trades about -0.06 of its potential returns per unit of risk. The Stryker is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  37,886  in Stryker on September 12, 2024 and sell it today you would lose (281.00) from holding Stryker or give up 0.74% of portfolio value over 90 days.

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

Koninklijke Philips NV  vs.  Stryker

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Stryker

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Stryker is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Koninklijke Philips and Stryker

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

The idea behind Koninklijke Philips NV and Stryker 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.