Correlation Between Koninklijke Philips and CONMED

Can any of the company-specific risk be diversified away by investing in both Koninklijke Philips and CONMED 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 CONMED 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 CONMED, you can compare the effects of market volatilities on Koninklijke Philips and CONMED 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 CONMED. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Philips and CONMED.

Diversification Opportunities for Koninklijke Philips and CONMED

-0.37

Correlation Coefficient

Koninklijke Philips  CONMED

Very good diversification

The 3 months correlation between Koninklijke and CONMED is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and CONMED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONMED 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 CONMED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONMED has no effect on the direction of Koninklijke Philips i.e., Koninklijke Philips and CONMED go up and down completely randomly.

Pair Corralation between Koninklijke Philips and CONMED

Considering the 90-day investment horizon Koninklijke Philips NV is expected to generate 1.4 times more return on investment than CONMED. However, Koninklijke Philips is 1.4 times more volatile than CONMED. It trades about 0.13 of its potential returns per unit of risk. CONMED is currently generating about -0.04 per unit of risk. If you would invest  2,025  in Koninklijke Philips NV on March 7, 2024 and sell it today you would earn a total of  624.00  from holding Koninklijke Philips NV or generate 30.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Koninklijke Philips NV  vs.  CONMED

Koninklijke Philips

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Philips NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical indicators, Koninklijke Philips reported solid returns over the last few months and may actually be approaching a breakup point.

CONMED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONMED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Koninklijke Philips and CONMED

The main advantage of trading using opposite Koninklijke Philips and CONMED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Philips position performs unexpectedly, CONMED 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 CONMED will offset losses from the drop in CONMED's long position.

The idea behind Koninklijke Philips NV and CONMED pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.