Correlation Between Outset MedicalInc and Laboratory

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

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

Diversification Opportunities for Outset MedicalInc and Laboratory

0.75

Correlation Coefficient

Outset MedicalInc  Laboratory

Poor diversification

The 3 months correlation between Outset and Laboratory is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Outset MedicalInc and Laboratory of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laboratory and Outset MedicalInc 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 Outset MedicalInc are associated (or correlated) with Laboratory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laboratory has no effect on the direction of Outset MedicalInc i.e., Outset MedicalInc and Laboratory go up and down completely randomly.

Pair Corralation between Outset MedicalInc and Laboratory

Allowing for the 90-day total investment horizon Outset MedicalInc is expected to generate 6.66 times more return on investment than Laboratory. However, Outset MedicalInc is 6.66 times more volatile than Laboratory of. It trades about 0.16 of its potential returns per unit of risk. Laboratory of is currently generating about -0.12 per unit of risk. If you would invest  206.00  in Outset MedicalInc on January 24, 2024 and sell it today you would earn a total of  40.00  from holding Outset MedicalInc or generate 19.42% return on investment over 90 days.

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

Outset MedicalInc  vs.  Laboratory of

Outset MedicalInc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Laboratory

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laboratory of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Outset MedicalInc and Laboratory

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

The idea behind Outset MedicalInc and Laboratory of 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.