Correlation Between Baxter International and Avanos Medical
Can any of the company-specific risk be diversified away by investing in both Baxter International and Avanos Medical 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 Baxter International and Avanos Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baxter International and Avanos Medical, you can compare the effects of market volatilities on Baxter International and Avanos Medical 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 Baxter International with a short position of Avanos Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baxter International and Avanos Medical.
Diversification Opportunities for Baxter International and Avanos Medical
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Baxter and Avanos is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and Avanos Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanos Medical and Baxter International 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 Baxter International are associated (or correlated) with Avanos Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanos Medical has no effect on the direction of Baxter International i.e., Baxter International and Avanos Medical go up and down completely randomly.
Pair Corralation between Baxter International and Avanos Medical
Considering the 90-day investment horizon Baxter International is expected to under-perform the Avanos Medical. But the stock apears to be less risky and, when comparing its historical volatility, Baxter International is 1.5 times less risky than Avanos Medical. The stock trades about -0.01 of its potential returns per unit of risk. The Avanos Medical is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,075 in Avanos Medical on September 4, 2024 and sell it today you would lose (172.00) from holding Avanos Medical or give up 8.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baxter International vs. Avanos Medical
Performance |
| Timeline |
| Baxter International |
| Avanos Medical |
Baxter International and Avanos Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baxter International and Avanos Medical
The main advantage of trading using opposite Baxter International and Avanos Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baxter International position performs unexpectedly, Avanos Medical 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 Avanos Medical will offset losses from the drop in Avanos Medical's long position.| Baxter International vs. Embecta Corp | Baxter International vs. West Pharmaceutical Services | Baxter International vs. ResMed Inc | Baxter International vs. The Cooper Companies, |
| Avanos Medical vs. Baxter International | Avanos Medical vs. West Pharmaceutical Services | Avanos Medical vs. ResMed Inc | Avanos Medical vs. The Cooper Companies, |
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.
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