Correlation Between Establishment Labs and Medtronic Plc

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.

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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 correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combing Establishment Labs and Medtronic Plc into the same portfolio which is an essential part of fundamental portfolio management process.

Diversification Opportunities for Establishment Labs and Medtronic Plc

0.63
Correlation
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Poor diversification

The 3 months correlation between Establishment and Medtronic is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Establishment Labs Holdings In 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 30 days, Establishment Labs Holdings is expected to generate 2.33 times more return on investment than Medtronic Plc. However, Establishment Labs is 2.33 times more volatile than Medtronic plc. It trades about 0.09 of its potential returns per unit of risk. Medtronic plc is currently generating about 0.06 per unit of risk. If you would invest  1,681  in Establishment Labs Holdings on May 7, 2020 and sell it today you would earn a total of  383.00  from holding Establishment Labs Holdings or generate 22.78% return on investment over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy96.97%
ValuesDaily Returns

Establishment Labs Holdings In  vs.  Medtronic plc

 Performance (%) 
      Timeline 
Establishment Labs 
66

Establishment Labs Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Establishment Labs Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 30 days. Despite somewhat weak basic indicators, Establishment Labs sustained solid returns over the last few months and may actually be approaching a breakup point.
Medtronic plc 
33

Medtronic Plc Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Medtronic plc are ranked lower than 3 (%) of all global equities and portfolios over the last 30 days. In spite of comparatively weak essential indicators, Medtronic Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Establishment Labs and Medtronic Plc Volatility Contrast

 Predicted Return Density 
      Returns 
Check out your portfolio center. Please also try Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.


 
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