Correlation Between Boston Scientific and Bio Rad

Can any of the company-specific risk be diversified away by investing in both Boston Scientific and Bio Rad 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 Boston Scientific and Bio Rad into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boston Scientific Corp and Bio Rad Laboratories, you can compare the effects of market volatilities on Boston Scientific and Bio Rad 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 Boston Scientific with a short position of Bio Rad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Scientific and Bio Rad.

Diversification Opportunities for Boston Scientific and Bio Rad

0.32

Correlation Coefficient

Boston Scientific  Bio Rad

Weak diversification

The 3 months correlation between Boston and Bio is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Boston Scientific Corp and Bio Rad Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio Rad Laboratories and Boston Scientific 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 Boston Scientific Corp are associated (or correlated) with Bio Rad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio Rad Laboratories has no effect on the direction of Boston Scientific i.e., Boston Scientific and Bio Rad go up and down completely randomly.

Pair Corralation between Boston Scientific and Bio Rad

Considering the 90-day investment horizon Boston Scientific Corp is expected to generate 0.28 times more return on investment than Bio Rad. However, Boston Scientific Corp is 3.55 times less risky than Bio Rad. It trades about -0.01 of its potential returns per unit of risk. Bio Rad Laboratories is currently generating about -0.32 per unit of risk. If you would invest  6,744  in Boston Scientific Corp on January 20, 2024 and sell it today you would lose (11.00) from holding Boston Scientific Corp or give up 0.16% of portfolio value over 90 days.

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

Boston Scientific Corp  vs.  Bio Rad Laboratories

Boston Scientific Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Boston Scientific may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Bio Rad Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bio Rad Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Boston Scientific and Bio Rad

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

The idea behind Boston Scientific Corp and Bio Rad Laboratories 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.