Correlation Between Neuropace and SANUWAVE Health

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

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

Diversification Opportunities for Neuropace and SANUWAVE Health

0.79

Correlation Coefficient

Neuropace  SANUWAVE Health

Poor diversification

The 3 months correlation between Neuropace and SANUWAVE is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Neuropace and SANUWAVE Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANUWAVE Health and Neuropace 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 Neuropace are associated (or correlated) with SANUWAVE Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANUWAVE Health has no effect on the direction of Neuropace i.e., Neuropace and SANUWAVE Health go up and down completely randomly.

Pair Corralation between Neuropace and SANUWAVE Health

Given the investment horizon of 90 days Neuropace is expected to generate 1.57 times less return on investment than SANUWAVE Health. But when comparing it to its historical volatility, Neuropace is 1.5 times less risky than SANUWAVE Health. It trades about 0.19 of its potential returns per unit of risk. SANUWAVE Health is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,985  in SANUWAVE Health on October 10, 2024 and sell it today you would earn a total of  415.00  from holding SANUWAVE Health or generate 20.91% return on investment over 90 days.

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

Neuropace  vs.  SANUWAVE Health

Neuropace

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Neuropace are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Neuropace exhibited solid returns over the last few months and may actually be approaching a breakup point.

SANUWAVE Health

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SANUWAVE Health are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SANUWAVE Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neuropace and SANUWAVE Health

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

The idea behind Neuropace and SANUWAVE Health 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.