Correlation Between Nephros and Haemonetics

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

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

Diversification Opportunities for Nephros and Haemonetics

-0.69

Correlation Coefficient

Nephros  Haemonetics

Excellent diversification

The 3 months correlation between Nephros and Haemonetics is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nephros and Haemonetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haemonetics and Nephros 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 Nephros are associated (or correlated) with Haemonetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haemonetics has no effect on the direction of Nephros i.e., Nephros and Haemonetics go up and down completely randomly.

Pair Corralation between Nephros and Haemonetics

Given the investment horizon of 90 days Nephros is expected to under-perform the Haemonetics. In addition to that, Nephros is 2.21 times more volatile than Haemonetics. It trades about -0.21 of its total potential returns per unit of risk. Haemonetics is currently generating about 0.29 per unit of volatility. If you would invest  7,487  in Haemonetics on January 29, 2024 and sell it today you would earn a total of  1,612  from holding Haemonetics or generate 21.53% return on investment over 90 days.

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

Nephros  vs.  Haemonetics

Nephros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nephros has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Haemonetics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haemonetics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Haemonetics may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Nephros and Haemonetics

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

The idea behind Nephros and Haemonetics 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.