Correlation Between DexCom and Medtronic PLC
Can any of the company-specific risk be diversified away by investing in both DexCom and Medtronic 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 Medtronic 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 Medtronic PLC, you can compare the effects of market volatilities on DexCom and Medtronic 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 Medtronic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of DexCom and Medtronic PLC.
Diversification Opportunities for DexCom and Medtronic PLC
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between DexCom and Medtronic is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic 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 Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of DexCom i.e., DexCom and Medtronic PLC go up and down completely randomly.
Pair Corralation between DexCom and Medtronic PLC
Given the investment horizon of 90 days DexCom Inc is expected to under-perform the Medtronic PLC. In addition to that, DexCom is 2.84 times more volatile than Medtronic PLC. It trades about -0.02 of its total potential returns per unit of risk. Medtronic PLC is currently generating about 0.01 per unit of volatility. If you would invest 8,331 in Medtronic PLC on August 28, 2024 and sell it today you would earn a total of 244.00 from holding Medtronic PLC or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DexCom Inc vs. Medtronic PLC
Performance |
| Timeline |
| DexCom Inc |
| Medtronic PLC |
DexCom and Medtronic PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DexCom and Medtronic PLC
The main advantage of trading using opposite DexCom and Medtronic PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DexCom position performs unexpectedly, Medtronic 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 Medtronic PLC will offset losses from the drop in Medtronic PLC's long position.The idea behind DexCom Inc and Medtronic 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.| Medtronic PLC vs. Edwards Lifesciences Corp | Medtronic PLC vs. Abbott Laboratories | Medtronic PLC vs. Boston Scientific Corp | Medtronic PLC vs. Zimmer Biomet Holdings |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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