Correlation Between DexCom and STERIS Plc

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

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

Diversification Opportunities for DexCom and STERIS Plc

-0.42

Correlation Coefficient

DexCom  STERIS Plc

Very good diversification

The 3 months correlation between DexCom and STERIS is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and STERIS plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STERIS plc and DexCom 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 DexCom Inc are associated (or correlated) with STERIS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STERIS plc has no effect on the direction of DexCom i.e., DexCom and STERIS Plc go up and down completely randomly.

Pair Corralation between DexCom and STERIS Plc

Given the investment horizon of 90 days DexCom Inc is expected to under-perform the STERIS Plc. In addition to that, DexCom is 2.42 times more volatile than STERIS plc. It trades about -0.13 of its total potential returns per unit of risk. STERIS plc is currently generating about -0.19 per unit of volatility. If you would invest  21,665  in STERIS plc on February 3, 2024 and sell it today you would lose (1,041) from holding STERIS plc or give up 4.8% of portfolio value over 90 days.

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

DexCom Inc  vs.  STERIS plc

DexCom Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, DexCom may actually be approaching a critical reversion point that can send shares even higher in June 2024.

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 rather sound basic indicators, STERIS Plc is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DexCom and STERIS Plc

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

The idea behind DexCom Inc and STERIS plc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.