Correlation Between Zimmer Biomet and Siemens Healthineers

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

Diversification Opportunities for Zimmer Biomet and Siemens Healthineers

0.72

Correlation Coefficient

Zimmer Biomet  Siemens Healthineers

Poor diversification

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

Pair Corralation between Zimmer Biomet and Siemens Healthineers

Considering the 90-day investment horizon Zimmer Biomet Holdings is expected to generate 0.51 times more return on investment than Siemens Healthineers. However, Zimmer Biomet Holdings is 1.97 times less risky than Siemens Healthineers. It trades about -0.36 of its potential returns per unit of risk. Siemens Healthineers AG is currently generating about -0.31 per unit of risk. If you would invest  12,975  in Zimmer Biomet Holdings on January 29, 2024 and sell it today you would lose (1,040) from holding Zimmer Biomet Holdings or give up 8.02% of portfolio value over 90 days.

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

Zimmer Biomet Holdings  vs.  Siemens Healthineers AG

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Siemens Healthineers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siemens Healthineers AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Siemens Healthineers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zimmer Biomet and Siemens Healthineers

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

The idea behind Zimmer Biomet Holdings and Siemens Healthineers AG 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.