Correlation Between Nuwellis and STRATA Skin

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

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

Diversification Opportunities for Nuwellis and STRATA Skin

0.33

Correlation Coefficient

Nuwellis  STRATA Skin

Weak diversification

The 3 months correlation between Nuwellis and STRATA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Nuwellis and STRATA Skin Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATA Skin Sciences and Nuwellis 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 Nuwellis are associated (or correlated) with STRATA Skin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATA Skin Sciences has no effect on the direction of Nuwellis i.e., Nuwellis and STRATA Skin go up and down completely randomly.

Pair Corralation between Nuwellis and STRATA Skin

Given the investment horizon of 90 days Nuwellis is expected to under-perform the STRATA Skin. In addition to that, Nuwellis is 2.7 times more volatile than STRATA Skin Sciences. It trades about -0.12 of its total potential returns per unit of risk. STRATA Skin Sciences is currently generating about -0.07 per unit of volatility. If you would invest  300.00  in STRATA Skin Sciences on October 5, 2024 and sell it today you would lose (9.00) from holding STRATA Skin Sciences or give up 3.0% of portfolio value over 90 days.

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

Nuwellis  vs.  STRATA Skin Sciences

Nuwellis

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuwellis are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Nuwellis exhibited solid returns over the last few months and may actually be approaching a breakup point.

STRATA Skin Sciences

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STRATA Skin Sciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward-looking signals, STRATA Skin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nuwellis and STRATA Skin

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

The idea behind Nuwellis and STRATA Skin Sciences 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.