Correlation Between Nevro Corp and Butterfly Network

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

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

Diversification Opportunities for Nevro Corp and Butterfly Network

-0.17

Correlation Coefficient

Nevro Corp  Butterfly Network

Good diversification

The 3 months correlation between Nevro and Butterfly is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Nevro Corp and Butterfly Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Butterfly Network and Nevro Corp 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 Nevro Corp are associated (or correlated) with Butterfly Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Butterfly Network has no effect on the direction of Nevro Corp i.e., Nevro Corp and Butterfly Network go up and down completely randomly.

Pair Corralation between Nevro Corp and Butterfly Network

Given the investment horizon of 90 days Nevro Corp is expected to generate 0.61 times more return on investment than Butterfly Network. However, Nevro Corp is 1.64 times less risky than Butterfly Network. It trades about 0.19 of its potential returns per unit of risk. Butterfly Network is currently generating about -0.04 per unit of risk. If you would invest  372.00  in Nevro Corp on December 29, 2024 and sell it today you would earn a total of  212.00  from holding Nevro Corp or generate 56.99% return on investment over 90 days.

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

Nevro Corp  vs.  Butterfly Network

Nevro Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nevro Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Nevro Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Butterfly Network

Risk-Adjusted Performance

Very Weak

Over the last 90 days Butterfly Network has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nevro Corp and Butterfly Network

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

The idea behind Nevro Corp and Butterfly Network 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.