Correlation Between Koninklijke Philips and Becton Dickinson
Can any of the company-specific risk be diversified away by investing in both Koninklijke Philips and Becton Dickinson 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 Koninklijke Philips and Becton Dickinson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Koninklijke Philips NV and Becton Dickinson and, you can compare the effects of market volatilities on Koninklijke Philips and Becton Dickinson 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 Koninklijke Philips with a short position of Becton Dickinson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Philips and Becton Dickinson.
Diversification Opportunities for Koninklijke Philips and Becton Dickinson
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Koninklijke and Becton is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and Becton Dickinson and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Becton Dickinson and Koninklijke Philips 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 Koninklijke Philips NV are associated (or correlated) with Becton Dickinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Becton Dickinson has no effect on the direction of Koninklijke Philips i.e., Koninklijke Philips and Becton Dickinson go up and down completely randomly.
Pair Corralation between Koninklijke Philips and Becton Dickinson
Considering the 90-day investment horizon Koninklijke Philips NV is expected to generate 1.0 times more return on investment than Becton Dickinson. However, Koninklijke Philips NV is 1.0 times less risky than Becton Dickinson. It trades about -0.02 of its potential returns per unit of risk. Becton Dickinson and is currently generating about -0.17 per unit of risk. If you would invest 2,662 in Koninklijke Philips NV on August 27, 2024 and sell it today you would lose (23.00) from holding Koninklijke Philips NV or give up 0.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Koninklijke Philips NV vs. Becton Dickinson and
Performance |
| Timeline |
| Koninklijke Philips |
| Becton Dickinson |
Koninklijke Philips and Becton Dickinson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Koninklijke Philips and Becton Dickinson
The main advantage of trading using opposite Koninklijke Philips and Becton Dickinson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Philips position performs unexpectedly, Becton Dickinson 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 Becton Dickinson will offset losses from the drop in Becton Dickinson's long position.| Koninklijke Philips vs. Heartbeam | Koninklijke Philips vs. EUDA Health Holdings | Koninklijke Philips vs. Nutex Health | Koninklijke Philips vs. Healthcare Triangle |
| Becton Dickinson vs. Heartbeam | Becton Dickinson vs. EUDA Health Holdings | Becton Dickinson vs. Nutex Health | Becton Dickinson vs. Healthcare Triangle |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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