Correlation Between Establishment Labs and Si Bone

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

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

Diversification Opportunities for Establishment Labs and Si Bone

0.26

Correlation Coefficient

Establishment Labs  Si Bone

Modest diversification

The 3 months correlation between Establishment and SIBN is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Establishment Labs Holdings and Si Bone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Si Bone and Establishment Labs 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 Establishment Labs Holdings are associated (or correlated) with Si Bone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Si Bone has no effect on the direction of Establishment Labs i.e., Establishment Labs and Si Bone go up and down completely randomly.

Pair Corralation between Establishment Labs and Si Bone

Given the investment horizon of 90 days Establishment Labs Holdings is expected to generate 1.32 times more return on investment than Si Bone. However, Establishment Labs is 1.32 times more volatile than Si Bone. It trades about 0.09 of its potential returns per unit of risk. Si Bone is currently generating about -0.03 per unit of risk. If you would invest  2,323  in Establishment Labs Holdings on September 3, 2024 and sell it today you would earn a total of  2,266  from holding Establishment Labs Holdings or generate 97.55% return on investment over 90 days.

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

Establishment Labs Holdings  vs.  Si Bone

Establishment Labs

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Establishment Labs Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Establishment Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

Si Bone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Si Bone has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Establishment Labs and Si Bone

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

The idea behind Establishment Labs Holdings and Si Bone 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.