Correlation Between LENSAR and Orthofix Medical

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

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

Diversification Opportunities for LENSAR and Orthofix Medical

-0.56

Correlation Coefficient

LENSAR  Orthofix Medical

Excellent diversification

The 3 months correlation between LENSAR and Orthofix is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and Orthofix Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orthofix Medical and LENSAR 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 LENSAR Inc are associated (or correlated) with Orthofix Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orthofix Medical has no effect on the direction of LENSAR i.e., LENSAR and Orthofix Medical go up and down completely randomly.

Pair Corralation between LENSAR and Orthofix Medical

Given the investment horizon of 90 days LENSAR Inc is expected to generate 4.0 times more return on investment than Orthofix Medical. However, LENSAR is 4.0 times more volatile than Orthofix Medical. It trades about 0.16 of its potential returns per unit of risk. Orthofix Medical is currently generating about -0.09 per unit of risk. If you would invest  866.00  in LENSAR Inc on December 29, 2024 and sell it today you would earn a total of  547.00  from holding LENSAR Inc or generate 63.16% return on investment over 90 days.

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

LENSAR Inc  vs.  Orthofix Medical

LENSAR Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

Orthofix Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orthofix Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with LENSAR and Orthofix Medical

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

The idea behind LENSAR Inc and Orthofix 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.