Correlation Between Biomerica and ReShape Lifesciences

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

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

Diversification Opportunities for Biomerica and ReShape Lifesciences

0.51

Correlation Coefficient

Biomerica  ReShape Lifesciences

Very weak diversification

The 3 months correlation between Biomerica and ReShape is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Biomerica and ReShape Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReShape Lifesciences and Biomerica 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 Biomerica are associated (or correlated) with ReShape Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReShape Lifesciences has no effect on the direction of Biomerica i.e., Biomerica and ReShape Lifesciences go up and down completely randomly.

Pair Corralation between Biomerica and ReShape Lifesciences

Given the investment horizon of 90 days Biomerica is expected to generate 1.34 times more return on investment than ReShape Lifesciences. However, Biomerica is 1.34 times more volatile than ReShape Lifesciences. It trades about 0.02 of its potential returns per unit of risk. ReShape Lifesciences is currently generating about -0.03 per unit of risk. If you would invest  31.00  in Biomerica on October 5, 2024 and sell it today you would lose (1.00) from holding Biomerica or give up 3.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Biomerica  vs.  ReShape Lifesciences

Biomerica

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Biomerica are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Biomerica may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Biomerica and ReShape Lifesciences

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

The idea behind Biomerica and ReShape Lifesciences 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.