Correlation Between Nevro Corp and P3 Health

Can any of the company-specific risk be diversified away by investing in both Nevro Corp and P3 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 Nevro Corp and P3 Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nevro Corp and P3 Health Partners, you can compare the effects of market volatilities on Nevro Corp and P3 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 Nevro Corp with a short position of P3 Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nevro Corp and P3 Health.

Diversification Opportunities for Nevro Corp and P3 Health

0.63

Correlation Coefficient

Nevro Corp  P3 Health

Poor diversification

The 3 months correlation between Nevro and PIIIW is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nevro Corp and P3 Health Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on P3 Health Partners 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 P3 Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of P3 Health Partners has no effect on the direction of Nevro Corp i.e., Nevro Corp and P3 Health go up and down completely randomly.

Pair Corralation between Nevro Corp and P3 Health

Given the investment horizon of 90 days Nevro Corp is expected to generate 1.53 times less return on investment than P3 Health. But when comparing it to its historical volatility, Nevro Corp is 3.54 times less risky than P3 Health. It trades about 0.19 of its potential returns per unit of risk. P3 Health Partners is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.00  in P3 Health Partners on December 28, 2024 and sell it today you would earn a total of  0.08  from holding P3 Health Partners or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	75.0%
Values	Daily Returns

Nevro Corp  vs.  P3 Health Partners

Nevro Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nevro Corp are ranked lower than 15 (%) 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.

P3 Health Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in P3 Health Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, P3 Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nevro Corp and P3 Health

The main advantage of trading using opposite Nevro Corp and P3 Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nevro Corp position performs unexpectedly, P3 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 P3 Health will offset losses from the drop in P3 Health's long position.

The idea behind Nevro Corp and P3 Health Partners 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 Transaction History module to view history of all your transactions and understand their impact on performance.