Correlation Between IRhythm Technologies and LivaNova PLC

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

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

Diversification Opportunities for IRhythm Technologies and LivaNova PLC

0.22

Correlation Coefficient

IRhythm Technologies  LivaNova PLC

Modest diversification

The 3 months correlation between IRhythm and LivaNova is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding iRhythm Technologies and LivaNova PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LivaNova PLC and IRhythm Technologies 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 iRhythm Technologies are associated (or correlated) with LivaNova PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LivaNova PLC has no effect on the direction of IRhythm Technologies i.e., IRhythm Technologies and LivaNova PLC go up and down completely randomly.

Pair Corralation between IRhythm Technologies and LivaNova PLC

Given the investment horizon of 90 days iRhythm Technologies is expected to generate 0.91 times more return on investment than LivaNova PLC. However, iRhythm Technologies is 1.1 times less risky than LivaNova PLC. It trades about 0.13 of its potential returns per unit of risk. LivaNova PLC is currently generating about -0.08 per unit of risk. If you would invest  8,692  in iRhythm Technologies on December 29, 2024 and sell it today you would earn a total of  1,808  from holding iRhythm Technologies or generate 20.8% return on investment over 90 days.

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

iRhythm Technologies  vs.  LivaNova PLC

iRhythm Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iRhythm Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, IRhythm Technologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

LivaNova PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days LivaNova PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with IRhythm Technologies and LivaNova PLC

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

The idea behind iRhythm Technologies and LivaNova PLC 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.