Correlation Between Tempur Sealy and Medtronic PLC
Can any of the company-specific risk be diversified away by investing in both Tempur Sealy and Medtronic 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 Tempur Sealy and Medtronic PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tempur Sealy International and Medtronic PLC, you can compare the effects of market volatilities on Tempur Sealy and Medtronic 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 Tempur Sealy with a short position of Medtronic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tempur Sealy and Medtronic PLC.
Diversification Opportunities for Tempur Sealy and Medtronic PLC
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tempur and Medtronic is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tempur Sealy International and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC and Tempur Sealy 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 Tempur Sealy International are associated (or correlated) with Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of Tempur Sealy i.e., Tempur Sealy and Medtronic PLC go up and down completely randomly.
Pair Corralation between Tempur Sealy and Medtronic PLC
Considering the 90-day investment horizon Tempur Sealy International is expected to under-perform the Medtronic PLC. In addition to that, Tempur Sealy is 1.22 times more volatile than Medtronic PLC. It trades about -0.28 of its total potential returns per unit of risk. Medtronic PLC is currently generating about -0.16 per unit of volatility. If you would invest 8,335 in Medtronic PLC on January 20, 2024 and sell it today you would lose (387.00) from holding Medtronic PLC or give up 4.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tempur Sealy International vs. Medtronic PLC
Performance |
| Timeline |
| Tempur Sealy Interna |
| Medtronic PLC |
Tempur Sealy and Medtronic PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tempur Sealy and Medtronic PLC
The main advantage of trading using opposite Tempur Sealy and Medtronic PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tempur Sealy position performs unexpectedly, Medtronic 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 Medtronic PLC will offset losses from the drop in Medtronic PLC's long position.| Tempur Sealy vs. La Z Boy Incorporated | Tempur Sealy vs. Purple Innovation | Tempur Sealy vs. MasterBrand | Tempur Sealy vs. Ethan Allen Interiors |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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