Correlation Between Stryker and Teleflex Incorporated

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

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

Diversification Opportunities for Stryker and Teleflex Incorporated

-0.49

Correlation Coefficient

Stryker  Teleflex Incorporated

Very good diversification

The 3 months correlation between Stryker and Teleflex is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and Teleflex Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teleflex Incorporated and Stryker 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 Stryker are associated (or correlated) with Teleflex Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teleflex Incorporated has no effect on the direction of Stryker i.e., Stryker and Teleflex Incorporated go up and down completely randomly.

Pair Corralation between Stryker and Teleflex Incorporated

Considering the 90-day investment horizon Stryker is expected to under-perform the Teleflex Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Stryker is 1.72 times less risky than Teleflex Incorporated. The stock trades about -0.33 of its potential returns per unit of risk. The Teleflex Incorporated is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  22,048  in Teleflex Incorporated on January 20, 2024 and sell it today you would lose (1,310) from holding Teleflex Incorporated or give up 5.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Stryker  vs.  Teleflex Incorporated

Stryker

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Stryker is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Teleflex Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teleflex Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Stryker and Teleflex Incorporated

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

The idea behind Stryker and Teleflex Incorporated 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.