Correlation Between Standard Biotools and DermTech

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

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

Diversification Opportunities for Standard Biotools and DermTech

-0.43

Correlation Coefficient

Standard Biotools  DermTech

Very good diversification

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

Pair Corralation between Standard Biotools and DermTech

Considering the 90-day investment horizon Standard Biotools is expected to generate 0.55 times more return on investment than DermTech. However, Standard Biotools is 1.83 times less risky than DermTech. It trades about 0.01 of its potential returns per unit of risk. DermTech is currently generating about -0.22 per unit of risk. If you would invest  250.00  in Standard Biotools on February 19, 2024 and sell it today you would earn a total of  0.00  from holding Standard Biotools or generate 0.0% return on investment over 90 days.

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

Standard Biotools  vs.  DermTech

Standard Biotools

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Biotools are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Standard Biotools is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

DermTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DermTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Standard Biotools and DermTech

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

The idea behind Standard Biotools and DermTech 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.