Correlation Between Masimo and Baxter International
Can any of the company-specific risk be diversified away by investing in both Masimo and Baxter International 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 Masimo and Baxter International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Masimo and Baxter International, you can compare the effects of market volatilities on Masimo and Baxter International 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 Masimo with a short position of Baxter International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masimo and Baxter International.
Diversification Opportunities for Masimo and Baxter International
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Masimo and Baxter is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Masimo and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International and Masimo 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 Masimo are associated (or correlated) with Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of Masimo i.e., Masimo and Baxter International go up and down completely randomly.
Pair Corralation between Masimo and Baxter International
Given the investment horizon of 90 days Masimo is expected to generate 0.91 times more return on investment than Baxter International. However, Masimo is 1.1 times less risky than Baxter International. It trades about 0.25 of its potential returns per unit of risk. Baxter International is currently generating about -0.21 per unit of risk. If you would invest 16,163 in Masimo on September 12, 2024 and sell it today you would earn a total of 1,302 from holding Masimo or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Masimo vs. Baxter International
Performance |
| Timeline |
| Masimo |
| Baxter International |
Masimo and Baxter International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Masimo and Baxter International
The main advantage of trading using opposite Masimo and Baxter International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masimo position performs unexpectedly, Baxter International 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 Baxter International will offset losses from the drop in Baxter International's long position.The idea behind Masimo and Baxter International 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.| Baxter International vs. West Pharmaceutical Services | Baxter International vs. Alcon AG | Baxter International vs. ResMed Inc | Baxter International vs. ICU Medical |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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