Correlation Between Zimmer Biomet and Koninklijke Philips

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

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

Diversification Opportunities for Zimmer Biomet and Koninklijke Philips

-0.72

Correlation Coefficient

Zimmer Biomet  Koninklijke Philips

Pay attention - limited upside

The 3 months correlation between Zimmer and Koninklijke is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Zimmer Biomet Holdings and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips and Zimmer Biomet 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 Zimmer Biomet Holdings are associated (or correlated) with Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Zimmer Biomet i.e., Zimmer Biomet and Koninklijke Philips go up and down completely randomly.

Pair Corralation between Zimmer Biomet and Koninklijke Philips

Considering the 90-day investment horizon Zimmer Biomet Holdings is expected to generate 0.55 times more return on investment than Koninklijke Philips. However, Zimmer Biomet Holdings is 1.82 times less risky than Koninklijke Philips. It trades about 0.02 of its potential returns per unit of risk. Koninklijke Philips NV is currently generating about -0.1 per unit of risk. If you would invest  10,602  in Zimmer Biomet Holdings on September 13, 2024 and sell it today you would earn a total of  82.00  from holding Zimmer Biomet Holdings or generate 0.77% return on investment over 90 days.

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

Zimmer Biomet Holdings  vs.  Koninklijke Philips NV

Zimmer Biomet Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zimmer Biomet Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Zimmer Biomet is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with Zimmer Biomet and Koninklijke Philips

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

The idea behind Zimmer Biomet Holdings and Koninklijke Philips NV 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..