Correlation Between ResMed and BioLife Solutions

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

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

Diversification Opportunities for ResMed and BioLife Solutions

0.48

Correlation Coefficient

ResMed  BioLife Solutions

Very weak diversification

The 3 months correlation between ResMed and BioLife is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding ResMed Inc and BioLife Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLife Solutions and ResMed 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 ResMed Inc 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 ResMed i.e., ResMed and BioLife Solutions go up and down completely randomly.

Pair Corralation between ResMed and BioLife Solutions

Considering the 90-day investment horizon ResMed is expected to generate 5.76 times less return on investment than BioLife Solutions. But when comparing it to its historical volatility, ResMed Inc is 2.19 times less risky than BioLife Solutions. It trades about 0.03 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ResMed Inc  vs.  BioLife Solutions

ResMed Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, ResMed is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 ResMed and BioLife Solutions

The main advantage of trading using opposite ResMed and BioLife Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ResMed 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 ResMed Inc 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.