Correlation Between Penumbra and DexCom

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

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

Diversification Opportunities for Penumbra and DexCom

-0.16

Correlation Coefficient

Penumbra  DexCom

Good diversification

The 3 months correlation between Penumbra and DexCom is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Penumbra and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc and Penumbra 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 Penumbra are associated (or correlated) with DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of Penumbra i.e., Penumbra and DexCom go up and down completely randomly.

Pair Corralation between Penumbra and DexCom

Considering the 90-day investment horizon Penumbra is expected to under-perform the DexCom. But the stock apears to be less risky and, when comparing its historical volatility, Penumbra is 1.13 times less risky than DexCom. The stock trades about -0.11 of its potential returns per unit of risk. The DexCom Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,422  in DexCom Inc on February 28, 2024 and sell it today you would earn a total of  1,315  from holding DexCom Inc or generate 11.51% return on investment over 90 days.

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

Penumbra  vs.  DexCom Inc

Penumbra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penumbra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

DexCom Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, DexCom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penumbra and DexCom

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

The idea behind Penumbra and DexCom 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.