Correlation Between DexCom and Masimo

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

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

Diversification Opportunities for DexCom and Masimo

0.61

Correlation Coefficient

DexCom  Masimo

Poor diversification

The 3 months correlation between DexCom and Masimo is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and Masimo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masimo and DexCom 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 DexCom Inc are associated (or correlated) with Masimo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masimo has no effect on the direction of DexCom i.e., DexCom and Masimo go up and down completely randomly.

Pair Corralation between DexCom and Masimo

Given the investment horizon of 90 days DexCom Inc is expected to generate 1.53 times more return on investment than Masimo. However, DexCom is 1.53 times more volatile than Masimo. It trades about 0.11 of its potential returns per unit of risk. Masimo is currently generating about 0.04 per unit of risk. If you would invest  7,772  in DexCom Inc on October 7, 2024 and sell it today you would earn a total of  335.00  from holding DexCom Inc or generate 4.31% return on investment over 90 days.

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

DexCom Inc  vs.  Masimo

DexCom Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, DexCom displayed solid returns over the last few months and may actually be approaching a breakup point.

Masimo

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with DexCom and Masimo

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

The idea behind DexCom Inc and Masimo 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.