Correlation Between Stryker and Insulet

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

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

Diversification Opportunities for Stryker and Insulet

0.89

Correlation Coefficient

Stryker  Insulet

Very poor diversification

The 3 months correlation between Stryker and Insulet is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and Insulet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insulet and Stryker 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 Stryker are associated (or correlated) with Insulet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insulet has no effect on the direction of Stryker i.e., Stryker and Insulet go up and down completely randomly.

Pair Corralation between Stryker and Insulet

Assuming the 90 days horizon Stryker is expected to generate 2.54 times less return on investment than Insulet. But when comparing it to its historical volatility, Stryker is 1.26 times less risky than Insulet. It trades about 0.14 of its potential returns per unit of risk. Insulet is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  18,155  in Insulet on August 31, 2024 and sell it today you would earn a total of  6,965  from holding Insulet or generate 38.36% return on investment over 90 days.

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

Stryker  vs.  Insulet

Stryker

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Stryker reported solid returns over the last few months and may actually be approaching a breakup point.

Insulet

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Insulet are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Insulet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stryker and Insulet

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

The idea behind Stryker and Insulet 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.