Correlation Between NeuroMetrix and ReShape Lifesciences

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

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

Diversification Opportunities for NeuroMetrix and ReShape Lifesciences

0.43

Correlation Coefficient

NeuroMetrix  ReShape Lifesciences

Very weak diversification

The 3 months correlation between NeuroMetrix and ReShape is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding NeuroMetrix and ReShape Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReShape Lifesciences and NeuroMetrix 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 NeuroMetrix are associated (or correlated) with ReShape Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReShape Lifesciences has no effect on the direction of NeuroMetrix i.e., NeuroMetrix and ReShape Lifesciences go up and down completely randomly.

Pair Corralation between NeuroMetrix and ReShape Lifesciences

Given the investment horizon of 90 days NeuroMetrix is expected to generate 0.39 times more return on investment than ReShape Lifesciences. However, NeuroMetrix is 2.58 times less risky than ReShape Lifesciences. It trades about 0.04 of its potential returns per unit of risk. ReShape Lifesciences is currently generating about -0.04 per unit of risk. If you would invest  400.00  in NeuroMetrix on October 12, 2024 and sell it today you would earn a total of  4.00  from holding NeuroMetrix or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

NeuroMetrix  vs.  ReShape Lifesciences

NeuroMetrix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NeuroMetrix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, NeuroMetrix is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

ReShape Lifesciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReShape Lifesciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NeuroMetrix and ReShape Lifesciences

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

The idea behind NeuroMetrix and ReShape Lifesciences 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.