Correlation Between BrainsWay and STRATA Skin

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

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

Diversification Opportunities for BrainsWay and STRATA Skin

0.51

Correlation Coefficient

BrainsWay  STRATA Skin

Very weak diversification

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

Pair Corralation between BrainsWay and STRATA Skin

Assuming the 90 days horizon BrainsWay is expected to under-perform the STRATA Skin. In addition to that, BrainsWay is 1.27 times more volatile than STRATA Skin Sciences. It trades about -0.13 of its total potential returns per unit of risk. STRATA Skin Sciences is currently generating about -0.02 per unit of volatility. If you would invest  288.00  in STRATA Skin Sciences on December 23, 2024 and sell it today you would lose (20.00) from holding STRATA Skin Sciences or give up 6.94% of portfolio value over 90 days.

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

BrainsWay  vs.  STRATA Skin Sciences

BrainsWay

Risk-Adjusted Performance

Very Weak

Over the last 90 days BrainsWay has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

STRATA Skin Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days STRATA Skin Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, STRATA Skin is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BrainsWay and STRATA Skin

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

The idea behind BrainsWay and STRATA Skin Sciences 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..