Correlation Between Medtronic PLC and Baxter International
Can any of the company-specific risk be diversified away by investing in both Medtronic PLC 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 Medtronic PLC and Baxter International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medtronic PLC and Baxter International, you can compare the effects of market volatilities on Medtronic PLC 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 Medtronic PLC with a short position of Baxter International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medtronic PLC and Baxter International.
Diversification Opportunities for Medtronic PLC and Baxter International
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Medtronic and Baxter is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Medtronic PLC and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International and Medtronic PLC 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 Medtronic PLC 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 Medtronic PLC i.e., Medtronic PLC and Baxter International go up and down completely randomly.
Pair Corralation between Medtronic PLC and Baxter International
Considering the 90-day investment horizon Medtronic PLC is expected to generate 0.65 times more return on investment than Baxter International. However, Medtronic PLC is 1.54 times less risky than Baxter International. It trades about -0.26 of its potential returns per unit of risk. Baxter International is currently generating about -0.22 per unit of risk. If you would invest 8,830 in Medtronic PLC on September 13, 2024 and sell it today you would lose (538.00) from holding Medtronic PLC or give up 6.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medtronic PLC vs. Baxter International
Performance |
| Timeline |
| Medtronic PLC |
| Baxter International |
Medtronic PLC and Baxter International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medtronic PLC and Baxter International
The main advantage of trading using opposite Medtronic PLC and Baxter International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medtronic PLC 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.| Medtronic PLC vs. Edwards Lifesciences Corp | Medtronic PLC vs. Abbott Laboratories | Medtronic PLC vs. Boston Scientific Corp | Medtronic PLC vs. Zimmer Biomet Holdings |
| Baxter International vs. Embecta Corp | Baxter International vs. West Pharmaceutical Services | Baxter International vs. ResMed Inc | Baxter International 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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