Correlation Between IRhythm Technologies and Natera

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

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

Diversification Opportunities for IRhythm Technologies and Natera

0.49

Correlation Coefficient

IRhythm Technologies  Natera

Very weak diversification

The 3 months correlation between IRhythm and Natera is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding iRhythm Technologies and Natera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natera Inc 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 Natera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natera Inc has no effect on the direction of IRhythm Technologies i.e., IRhythm Technologies and Natera go up and down completely randomly.

Pair Corralation between IRhythm Technologies and Natera

Given the investment horizon of 90 days IRhythm Technologies is expected to generate 1.61 times less return on investment than Natera. In addition to that, IRhythm Technologies is 1.33 times more volatile than Natera Inc. It trades about 0.09 of its total potential returns per unit of risk. Natera Inc is currently generating about 0.19 per unit of volatility. If you would invest  11,766  in Natera Inc on September 8, 2024 and sell it today you would earn a total of  5,399  from holding Natera Inc or generate 45.89% return on investment over 90 days.

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

iRhythm Technologies  vs.  Natera Inc

iRhythm Technologies

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iRhythm Technologies are ranked lower than 7 (%) 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.

Natera Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Natera sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IRhythm Technologies and Natera

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

The idea behind iRhythm Technologies and Natera Inc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.