Correlation Between LivaNova PLC and Globus Medical

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

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

Diversification Opportunities for LivaNova PLC and Globus Medical

0.88

Correlation Coefficient

LivaNova PLC  Globus Medical

Very poor diversification

The 3 months correlation between LivaNova and Globus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding LivaNova PLC and Globus Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globus Medical and LivaNova PLC 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 LivaNova PLC are associated (or correlated) with Globus Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globus Medical has no effect on the direction of LivaNova PLC i.e., LivaNova PLC and Globus Medical go up and down completely randomly.

Pair Corralation between LivaNova PLC and Globus Medical

Given the investment horizon of 90 days LivaNova PLC is expected to under-perform the Globus Medical. In addition to that, LivaNova PLC is 1.6 times more volatile than Globus Medical. It trades about -0.08 of its total potential returns per unit of risk. Globus Medical is currently generating about -0.11 per unit of volatility. If you would invest  8,267  in Globus Medical on December 29, 2024 and sell it today you would lose (1,012) from holding Globus Medical or give up 12.24% of portfolio value over 90 days.

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

LivaNova PLC  vs.  Globus Medical

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.

Globus Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globus Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with LivaNova PLC and Globus Medical

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

The idea behind LivaNova PLC and Globus 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.