Correlation Between InMode and Newtopia

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

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

Diversification Opportunities for InMode and Newtopia

0.35

Correlation Coefficient

InMode  Newtopia

Weak diversification

The 3 months correlation between InMode and Newtopia is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding InMode and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia and InMode 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 InMode are associated (or correlated) with Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of InMode i.e., InMode and Newtopia go up and down completely randomly.

Pair Corralation between InMode and Newtopia

Given the investment horizon of 90 days InMode is expected to generate 0.19 times more return on investment than Newtopia. However, InMode is 5.29 times less risky than Newtopia. It trades about -0.02 of its potential returns per unit of risk. Newtopia is currently generating about -0.02 per unit of risk. If you would invest  2,267  in InMode on December 2, 2024 and sell it today you would lose (395.00) from holding InMode or give up 17.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.02%
Values	Daily Returns

InMode  vs.  Newtopia

InMode

Risk-Adjusted Performance

Very Weak

Over the last 90 days InMode has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, InMode is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Newtopia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newtopia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Newtopia is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with InMode and Newtopia

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

The idea behind InMode and Newtopia 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.