Correlation Between STERIS Plc and CONMED

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

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

Diversification Opportunities for STERIS Plc and CONMED

0.25

Correlation Coefficient

STERIS Plc  CONMED

Modest diversification

The 3 months correlation between STERIS and CONMED is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding STERIS plc and CONMED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONMED and STERIS Plc 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 STERIS plc are associated (or correlated) with CONMED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONMED has no effect on the direction of STERIS Plc i.e., STERIS Plc and CONMED go up and down completely randomly.

Pair Corralation between STERIS Plc and CONMED

Considering the 90-day investment horizon STERIS plc is expected to under-perform the CONMED. But the stock apears to be less risky and, when comparing its historical volatility, STERIS plc is 1.96 times less risky than CONMED. The stock trades about -0.11 of its potential returns per unit of risk. The CONMED is currently generating about 0.05 of returns per unit of risk over similar time horizon. 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

STERIS plc  vs.  CONMED

STERIS plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STERIS plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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.

Pair Trading with STERIS Plc and CONMED

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

The idea behind STERIS plc and CONMED 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.