Correlation Between STERIS Plc and ZimVie

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

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

Diversification Opportunities for STERIS Plc and ZimVie

0.61

Correlation Coefficient

STERIS Plc  ZimVie

Poor diversification

The 3 months correlation between STERIS and ZimVie is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding STERIS plc and ZimVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZimVie Inc 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 ZimVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZimVie Inc has no effect on the direction of STERIS Plc i.e., STERIS Plc and ZimVie go up and down completely randomly.

Pair Corralation between STERIS Plc and ZimVie

Considering the 90-day investment horizon STERIS plc is expected to generate 0.53 times more return on investment than ZimVie. However, STERIS plc is 1.88 times less risky than ZimVie. It trades about -0.18 of its potential returns per unit of risk. ZimVie Inc is currently generating about -0.18 per unit of risk. 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

STERIS plc  vs.  ZimVie Inc

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ZimVie Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZimVie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with STERIS Plc and ZimVie

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

The idea behind STERIS plc and ZimVie Inc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.