Correlation Between Establishment Labs and Medtronic PLC
Can any of the company-specific risk be diversified away by investing in both Establishment Labs 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 Establishment Labs and Medtronic PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Establishment Labs Holdings and Medtronic PLC, you can compare the effects of market volatilities on Establishment Labs 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 Establishment Labs with a short position of Medtronic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Establishment Labs and Medtronic PLC.
Diversification Opportunities for Establishment Labs and Medtronic PLC
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Establishment and Medtronic is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Establishment Labs Holdings and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC and Establishment Labs 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 Establishment Labs Holdings 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 Establishment Labs i.e., Establishment Labs and Medtronic PLC go up and down completely randomly.
Pair Corralation between Establishment Labs and Medtronic PLC
Given the investment horizon of 90 days Establishment Labs Holdings is expected to generate 2.81 times more return on investment than Medtronic PLC. However, Establishment Labs is 2.81 times more volatile than Medtronic PLC. It trades about 0.0 of its potential returns per unit of risk. Medtronic PLC is currently generating about -0.02 per unit of risk. If you would invest 7,310 in Establishment Labs Holdings on January 24, 2024 and sell it today you would lose (2,483) from holding Establishment Labs Holdings or give up 33.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Establishment Labs Holdings vs. Medtronic PLC
Performance |
| Timeline |
| Establishment Labs |
| Medtronic PLC |
Establishment Labs and Medtronic PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Establishment Labs and Medtronic PLC
The main advantage of trading using opposite Establishment Labs and Medtronic PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Establishment Labs 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.| Establishment Labs vs. HealthStream | Establishment Labs vs. National Research Corp | Establishment Labs vs. HealthEquity | Establishment Labs vs. Health Catalyst |
| Medtronic PLC vs. HealthStream | Medtronic PLC vs. National Research Corp | Medtronic PLC vs. HealthEquity | Medtronic PLC vs. Health Catalyst |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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