Correlation Between Medtronic PLC and LivaNova PLC
Can any of the company-specific risk be diversified away by investing in both Medtronic PLC and LivaNova 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 Medtronic PLC and LivaNova PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medtronic PLC and LivaNova PLC, you can compare the effects of market volatilities on Medtronic PLC and LivaNova 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 Medtronic PLC with a short position of LivaNova PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medtronic PLC and LivaNova PLC.
Diversification Opportunities for Medtronic PLC and LivaNova PLC
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Medtronic and LivaNova is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Medtronic PLC and LivaNova PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LivaNova PLC 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 LivaNova PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LivaNova PLC has no effect on the direction of Medtronic PLC i.e., Medtronic PLC and LivaNova PLC go up and down completely randomly.
Pair Corralation between Medtronic PLC and LivaNova PLC
Considering the 90-day investment horizon Medtronic PLC is expected to under-perform the LivaNova PLC. But the stock apears to be less risky and, when comparing its historical volatility, Medtronic PLC is 1.84 times less risky than LivaNova PLC. The stock trades about -0.15 of its potential returns per unit of risk. The LivaNova PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,113 in LivaNova PLC on September 2, 2024 and sell it today you would earn a total of 137.00 from holding LivaNova PLC or generate 2.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medtronic PLC vs. LivaNova PLC
Performance |
| Timeline |
| Medtronic PLC |
| LivaNova PLC |
Medtronic PLC and LivaNova PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medtronic PLC and LivaNova PLC
The main advantage of trading using opposite Medtronic PLC and LivaNova PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medtronic PLC position performs unexpectedly, LivaNova 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 LivaNova PLC will offset losses from the drop in LivaNova PLC'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 |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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