Correlation Between Medtronic PLC and LENSAR

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

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

Diversification Opportunities for Medtronic PLC and LENSAR

-0.49

Correlation Coefficient

Medtronic PLC  LENSAR

Very good diversification

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

Pair Corralation between Medtronic PLC and LENSAR

Considering the 90-day investment horizon Medtronic PLC is expected to under-perform the LENSAR. But the stock apears to be less risky and, when comparing its historical volatility, Medtronic PLC is 4.65 times less risky than LENSAR. The stock trades about -0.03 of its potential returns per unit of risk. The LENSAR Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  463.00  in LENSAR Inc on August 31, 2024 and sell it today you would earn a total of  306.00  from holding LENSAR Inc or generate 66.09% return on investment over 90 days.

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

Medtronic PLC  vs.  LENSAR Inc

Medtronic PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medtronic PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Medtronic PLC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

LENSAR Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 14 (%) 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.

Pair Trading with Medtronic PLC and LENSAR

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

The idea behind Medtronic PLC and LENSAR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.