Correlation Between Paragon 28 and Semler Scientific

Can any of the company-specific risk be diversified away by investing in both Paragon 28 and Semler Scientific 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 Paragon 28 and Semler Scientific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Paragon 28 and Semler Scientific, you can compare the effects of market volatilities on Paragon 28 and Semler Scientific 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 Paragon 28 with a short position of Semler Scientific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paragon 28 and Semler Scientific.

Diversification Opportunities for Paragon 28 and Semler Scientific

0.92

Correlation Coefficient

Paragon 28  Semler Scientific

Almost no diversification

The 3 months correlation between Paragon and Semler is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Paragon 28 and Semler Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semler Scientific and Paragon 28 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 Paragon 28 are associated (or correlated) with Semler Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semler Scientific has no effect on the direction of Paragon 28 i.e., Paragon 28 and Semler Scientific go up and down completely randomly.

Pair Corralation between Paragon 28 and Semler Scientific

Considering the 90-day investment horizon Paragon 28 is expected to generate 1.18 times less return on investment than Semler Scientific. But when comparing it to its historical volatility, Paragon 28 is 1.54 times less risky than Semler Scientific. It trades about 0.19 of its potential returns per unit of risk. Semler Scientific is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,011  in Semler Scientific on October 7, 2024 and sell it today you would earn a total of  1,893  from holding Semler Scientific or generate 47.2% return on investment over 90 days.

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

Paragon 28  vs.  Semler Scientific

Paragon 28

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paragon 28 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Paragon 28 sustained solid returns over the last few months and may actually be approaching a breakup point.

Semler Scientific

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Semler Scientific are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Semler Scientific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paragon 28 and Semler Scientific

The main advantage of trading using opposite Paragon 28 and Semler Scientific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paragon 28 position performs unexpectedly, Semler Scientific 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 Semler Scientific will offset losses from the drop in Semler Scientific's long position.

The idea behind Paragon 28 and Semler Scientific 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.