Correlation Between Baxter International and Sartorius Aktiengesellscha

Can any of the company-specific risk be diversified away by investing in both Baxter International and Sartorius Aktiengesellscha 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 Baxter International and Sartorius Aktiengesellscha into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Baxter International and Sartorius Aktiengesellschaft, you can compare the effects of market volatilities on Baxter International and Sartorius Aktiengesellscha 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 Baxter International with a short position of Sartorius Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baxter International and Sartorius Aktiengesellscha.

Diversification Opportunities for Baxter International and Sartorius Aktiengesellscha

0.66

Correlation Coefficient

Baxter International  Sartorius Aktiengesellscha

Poor diversification

The 3 months correlation between Baxter and Sartorius is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and Sartorius Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sartorius Aktiengesellscha and Baxter International 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 Baxter International are associated (or correlated) with Sartorius Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sartorius Aktiengesellscha has no effect on the direction of Baxter International i.e., Baxter International and Sartorius Aktiengesellscha go up and down completely randomly.

Pair Corralation between Baxter International and Sartorius Aktiengesellscha

Considering the 90-day investment horizon Baxter International is expected to generate 0.36 times more return on investment than Sartorius Aktiengesellscha. However, Baxter International is 2.78 times less risky than Sartorius Aktiengesellscha. It trades about -0.04 of its potential returns per unit of risk. Sartorius Aktiengesellschaft is currently generating about -0.24 per unit of risk. If you would invest  4,154  in Baxter International on January 26, 2024 and sell it today you would lose (61.00) from holding Baxter International or give up 1.47% of portfolio value over 90 days.

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

Baxter International  vs.  Sartorius Aktiengesellschaft

Baxter International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baxter International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Baxter International may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Sartorius Aktiengesellscha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sartorius Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Baxter International and Sartorius Aktiengesellscha

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

The idea behind Baxter International and Sartorius Aktiengesellschaft 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.