Correlation Between Globus Medical and Heart Test

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

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

Diversification Opportunities for Globus Medical and Heart Test

-0.38

Correlation Coefficient

Globus Medical  Heart Test

Very good diversification

The 3 months correlation between Globus and Heart is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Globus Medical and Heart Test Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heart Test Laboratories and Globus Medical 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 Globus Medical are associated (or correlated) with Heart Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heart Test Laboratories has no effect on the direction of Globus Medical i.e., Globus Medical and Heart Test go up and down completely randomly.

Pair Corralation between Globus Medical and Heart Test

Given the investment horizon of 90 days Globus Medical is expected to generate 0.23 times more return on investment than Heart Test. However, Globus Medical is 4.39 times less risky than Heart Test. It trades about 0.08 of its potential returns per unit of risk. Heart Test Laboratories is currently generating about -0.06 per unit of risk. If you would invest  5,105  in Globus Medical on October 4, 2024 and sell it today you would earn a total of  3,166  from holding Globus Medical or generate 62.02% return on investment over 90 days.

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

Globus Medical  vs.  Heart Test Laboratories

Globus Medical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globus Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Globus Medical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Heart Test Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heart Test Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Heart Test is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Globus Medical and Heart Test

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

The idea behind Globus Medical and Heart Test Laboratories 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.