Correlation Between Nephros and LeMaitre Vascular

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

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

Diversification Opportunities for Nephros and LeMaitre Vascular

-0.26

Correlation Coefficient

Nephros  LeMaitre Vascular

Very good diversification

The 3 months correlation between Nephros and LeMaitre is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nephros and LeMaitre Vascular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LeMaitre Vascular and Nephros 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 Nephros are associated (or correlated) with LeMaitre Vascular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LeMaitre Vascular has no effect on the direction of Nephros i.e., Nephros and LeMaitre Vascular go up and down completely randomly.

Pair Corralation between Nephros and LeMaitre Vascular

Given the investment horizon of 90 days Nephros is expected to under-perform the LeMaitre Vascular. In addition to that, Nephros is 1.25 times more volatile than LeMaitre Vascular. It trades about -0.12 of its total potential returns per unit of risk. LeMaitre Vascular is currently generating about 0.15 per unit of volatility. If you would invest  9,015  in LeMaitre Vascular on August 30, 2024 and sell it today you would earn a total of  1,565  from holding LeMaitre Vascular or generate 17.36% return on investment over 90 days.

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

Nephros  vs.  LeMaitre Vascular

Nephros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nephros has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

LeMaitre Vascular

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LeMaitre Vascular are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LeMaitre Vascular unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nephros and LeMaitre Vascular

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

The idea behind Nephros and LeMaitre Vascular 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.