Correlation Between Zimmer Biomet and Boston Scientific

Can any of the company-specific risk be diversified away by investing in both Zimmer Biomet and Boston Scientific 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 Boston Scientific 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 Boston Scientific Corp, you can compare the effects of market volatilities on Zimmer Biomet and Boston Scientific 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 Boston Scientific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zimmer Biomet and Boston Scientific.

Diversification Opportunities for Zimmer Biomet and Boston Scientific

0.11

Correlation Coefficient

Zimmer Biomet  Boston Scientific

Average diversification

The 3 months correlation between Zimmer and Boston is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Zimmer Biomet Holdings and Boston Scientific Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Scientific Corp 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 Boston Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Scientific Corp has no effect on the direction of Zimmer Biomet i.e., Zimmer Biomet and Boston Scientific go up and down completely randomly.

Pair Corralation between Zimmer Biomet and Boston Scientific

Considering the 90-day investment horizon Zimmer Biomet Holdings is expected to under-perform the Boston Scientific. But the stock apears to be less risky and, when comparing its historical volatility, Zimmer Biomet Holdings is 1.31 times less risky than Boston Scientific. The stock trades about -0.36 of its potential returns per unit of risk. The Boston Scientific Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  6,810  in Boston Scientific Corp on January 29, 2024 and sell it today you would earn a total of  507.00  from holding Boston Scientific Corp or generate 7.44% return on investment over 90 days.

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

Zimmer Biomet Holdings  vs.  Boston Scientific Corp

Zimmer Biomet Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zimmer Biomet Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Boston Scientific Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Boston Scientific showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zimmer Biomet and Boston Scientific

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

The idea behind Zimmer Biomet Holdings and Boston Scientific Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.