Correlation Between United States and Danaher
Can any of the company-specific risk be diversified away by investing in both United States and Danaher 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 United States and Danaher into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Danaher, you can compare the effects of market volatilities on United States and Danaher 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 United States with a short position of Danaher. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Danaher.
Diversification Opportunities for United States and Danaher
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between United and Danaher is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher and United States 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 United States Steel are associated (or correlated) with Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of United States i.e., United States and Danaher go up and down completely randomly.
Pair Corralation between United States and Danaher
Assuming the 90 days trading horizon United States Steel is expected to generate 1.84 times more return on investment than Danaher. However, United States is 1.84 times more volatile than Danaher. It trades about 0.04 of its potential returns per unit of risk. Danaher is currently generating about -0.02 per unit of risk. If you would invest 3,512 in United States Steel on September 1, 2024 and sell it today you would earn a total of 278.00 from holding United States Steel or generate 7.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.24% |
| Values | Daily Returns |
United States Steel vs. Danaher
Performance |
| Timeline |
| United States Steel |
| Danaher |
United States and Danaher Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Danaher
The main advantage of trading using opposite United States and Danaher positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Danaher 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 Danaher will offset losses from the drop in Danaher's long position.| United States vs. PT Indofood Sukses | United States vs. NIPPON MEAT PACKERS | United States vs. Food Life Companies | United States vs. Silicon Motion Technology |
| Danaher vs. MeVis Medical Solutions | Danaher vs. Tianjin Capital Environmental | Danaher vs. United States Steel | Danaher vs. BLUESCOPE STEEL |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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