Correlation Between ReShape Lifesciences and Danaher

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

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

Diversification Opportunities for ReShape Lifesciences and Danaher

0.29

Correlation Coefficient

ReShape Lifesciences  Danaher

Modest diversification

The @@bw1eo months correlation between ReShape and Danaher is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ReShape Lifesciences and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher and ReShape Lifesciences 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 ReShape Lifesciences are associated (or correlated) with Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of ReShape Lifesciences i.e., ReShape Lifesciences and Danaher go up and down completely randomly.

Pair Corralation between ReShape Lifesciences and Danaher

Given the investment horizon of 90 days ReShape Lifesciences is expected to under-perform the Danaher. In addition to that, ReShape Lifesciences is 4.91 times more volatile than Danaher. It trades about -0.12 of its total potential returns per unit of risk. Danaher is currently generating about 0.06 per unit of volatility. If you would invest  20,750  in Danaher on February 3, 2024 and sell it today you would earn a total of  4,088  from holding Danaher or generate 19.7% return on investment over 90 days.

Time Period	@@bw1EO Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ReShape Lifesciences  vs.  Danaher

ReShape Lifesciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReShape Lifesciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Danaher

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danaher are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Danaher is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ReShape Lifesciences and Danaher

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

The idea behind ReShape Lifesciences and Danaher 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.