Correlation Between Paragon 28 and LENSAR

Can any of the company-specific risk be diversified away by investing in both Paragon 28 and LENSAR 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 Paragon 28 and LENSAR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Paragon 28 and LENSAR Inc, you can compare the effects of market volatilities on Paragon 28 and LENSAR 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 Paragon 28 with a short position of LENSAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paragon 28 and LENSAR.

Diversification Opportunities for Paragon 28 and LENSAR

0.43

Correlation Coefficient

Paragon 28  LENSAR

Very weak diversification

The 3 months correlation between Paragon and LENSAR is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Paragon 28 and LENSAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENSAR Inc and Paragon 28 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 Paragon 28 are associated (or correlated) with LENSAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENSAR Inc has no effect on the direction of Paragon 28 i.e., Paragon 28 and LENSAR go up and down completely randomly.

Pair Corralation between Paragon 28 and LENSAR

Considering the 90-day investment horizon Paragon 28 is expected to generate 47.82 times less return on investment than LENSAR. But when comparing it to its historical volatility, Paragon 28 is 24.79 times less risky than LENSAR. It trades about 0.06 of its potential returns per unit of risk. LENSAR Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,065  in LENSAR Inc on February 3, 2025 and sell it today you would earn a total of  331.00  from holding LENSAR Inc or generate 31.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	84.38%
Values	Daily Returns

Paragon 28  vs.  LENSAR Inc

Paragon 28

Risk-Adjusted Performance

Insignificant

Over the last 90 days Paragon 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Paragon 28 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

LENSAR Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paragon 28 and LENSAR

The main advantage of trading using opposite Paragon 28 and LENSAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paragon 28 position performs unexpectedly, LENSAR 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 LENSAR will offset losses from the drop in LENSAR's long position.

The idea behind Paragon 28 and LENSAR Inc 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.