Correlation Between Axonics Modulation and Natera

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

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

Diversification Opportunities for Axonics Modulation and Natera

0.69

Correlation Coefficient

Axonics Modulation  Natera

Poor diversification

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

Pair Corralation between Axonics Modulation and Natera

Given the investment horizon of 90 days Axonics Modulation is expected to generate 10.6 times less return on investment than Natera. But when comparing it to its historical volatility, Axonics Modulation Technologies is 13.35 times less risky than Natera. It trades about 0.24 of its potential returns per unit of risk. Natera Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  11,766  in Natera Inc on September 8, 2024 and sell it today you would earn a total of  5,399  from holding Natera Inc or generate 45.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.92%
Values	Daily Returns

Axonics Modulation Technologie  vs.  Natera Inc

Axonics Modulation

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Axonics Modulation Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Axonics Modulation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Natera Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Natera sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axonics Modulation and Natera

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

The idea behind Axonics Modulation Technologies and Natera 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.