Correlation Between IRIDEX and Neuropace

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

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

Diversification Opportunities for IRIDEX and Neuropace

0.32

Correlation Coefficient

IRIDEX  Neuropace

Weak diversification

The 3 months correlation between IRIDEX and Neuropace is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding IRIDEX and Neuropace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuropace 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 Neuropace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuropace has no effect on the direction of IRIDEX i.e., IRIDEX and Neuropace go up and down completely randomly.

Pair Corralation between IRIDEX and Neuropace

Given the investment horizon of 90 days IRIDEX is expected to under-perform the Neuropace. In addition to that, IRIDEX is 1.7 times more volatile than Neuropace. It trades about -0.1 of its total potential returns per unit of risk. Neuropace is currently generating about 0.06 per unit of volatility. If you would invest  1,087  in Neuropace on December 30, 2024 and sell it today you would earn a total of  98.00  from holding Neuropace or generate 9.02% return on investment over 90 days.

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

IRIDEX  vs.  Neuropace

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.

Neuropace

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Neuropace are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Neuropace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IRIDEX and Neuropace

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

The idea behind IRIDEX and Neuropace 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.