Correlation Between ResMed and Stryker

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

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

Diversification Opportunities for ResMed and Stryker

0.23

Correlation Coefficient

ResMed  Stryker

Modest diversification

The 3 months correlation between ResMed and Stryker is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding ResMed Inc and Stryker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stryker 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 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 ResMed i.e., ResMed and Stryker go up and down completely randomly.

Pair Corralation between ResMed and Stryker

Considering the 90-day investment horizon ResMed is expected to generate 4.66 times less return on investment than Stryker. In addition to that, ResMed is 1.6 times more volatile than Stryker. It trades about 0.02 of its total potential returns per unit of risk. Stryker is currently generating about 0.14 per unit of volatility. If you would invest  35,721  in Stryker on September 5, 2024 and sell it today you would earn a total of  3,376  from holding Stryker or generate 9.45% return on investment over 90 days.

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

ResMed Inc  vs.  Stryker

ResMed Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 1 (%) 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.

Stryker

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Stryker may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ResMed and Stryker

The main advantage of trading using opposite ResMed and Stryker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ResMed 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 ResMed Inc 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.