Correlation Between Danaher and Stryker

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

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

Diversification Opportunities for Danaher and Stryker

0.68

Correlation Coefficient

Danaher  Stryker

Poor diversification

The 3 months correlation between Danaher and Stryker is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and Stryker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stryker and Danaher 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 Danaher 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 Danaher i.e., Danaher and Stryker go up and down completely randomly.

Pair Corralation between Danaher and Stryker

Considering the 90-day investment horizon Danaher is expected to generate 1.74 times more return on investment than Stryker. However, Danaher is 1.74 times more volatile than Stryker. It trades about 0.05 of its potential returns per unit of risk. Stryker is currently generating about -0.28 per unit of risk. If you would invest  24,428  in Danaher on February 5, 2024 and sell it today you would earn a total of  410.00  from holding Danaher or generate 1.68% return on investment over 90 days.

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

Danaher  vs.  Stryker

Danaher

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danaher are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Danaher is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Stryker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stryker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Stryker is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Danaher and Stryker

The main advantage of trading using opposite Danaher and Stryker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danaher 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 Danaher 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.