Correlation Between IRIDEX and Modular Medical

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

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

Diversification Opportunities for IRIDEX and Modular Medical

0.68

Correlation Coefficient

IRIDEX  Modular Medical

Poor diversification

The 3 months correlation between IRIDEX and Modular is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding IRIDEX and Modular Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modular Medical and IRIDEX 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 IRIDEX are associated (or correlated) with Modular Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modular Medical has no effect on the direction of IRIDEX i.e., IRIDEX and Modular Medical go up and down completely randomly.

Pair Corralation between IRIDEX and Modular Medical

Given the investment horizon of 90 days IRIDEX is expected to under-perform the Modular Medical. In addition to that, IRIDEX is 1.61 times more volatile than Modular Medical. It trades about -0.1 of its total potential returns per unit of risk. Modular Medical is currently generating about -0.07 per unit of volatility. If you would invest  139.00  in Modular Medical on December 29, 2024 and sell it today you would lose (29.00) from holding Modular Medical or give up 20.86% of portfolio value over 90 days.

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

IRIDEX  vs.  Modular Medical

IRIDEX

Risk-Adjusted Performance

Very Weak

Over the last 90 days IRIDEX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Modular Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Modular Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with IRIDEX and Modular Medical

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

The idea behind IRIDEX and Modular Medical 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.