Correlation Between Laboratory and Butterfly Network

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

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

Diversification Opportunities for Laboratory and Butterfly Network

0.81

Correlation Coefficient

Laboratory  Butterfly Network

Very poor diversification

The 3 months correlation between Laboratory and Butterfly is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and Butterfly Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Butterfly Network and Laboratory 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 Laboratory of are associated (or correlated) with Butterfly Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Butterfly Network has no effect on the direction of Laboratory i.e., Laboratory and Butterfly Network go up and down completely randomly.

Pair Corralation between Laboratory and Butterfly Network

Allowing for the 90-day total investment horizon Laboratory is expected to generate 20.49 times less return on investment than Butterfly Network. But when comparing it to its historical volatility, Laboratory of is 4.68 times less risky than Butterfly Network. It trades about 0.04 of its potential returns per unit of risk. Butterfly Network is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  183.00  in Butterfly Network on September 14, 2024 and sell it today you would earn a total of  156.00  from holding Butterfly Network or generate 85.25% return on investment over 90 days.

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

Laboratory of  vs.  Butterfly Network

Laboratory

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Laboratory of are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Laboratory is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Butterfly Network

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Butterfly Network showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laboratory and Butterfly Network

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

The idea behind Laboratory of and Butterfly Network 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.