Correlation Between Outset Medical and Chemed Corp

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

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

Diversification Opportunities for Outset Medical and Chemed Corp

-0.47

Correlation Coefficient

Outset Medical  Chemed Corp

Very good diversification

The 3 months correlation between Outset and Chemed is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Outset Medical and Chemed Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemed Corp and Outset Medical 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 Outset Medical are associated (or correlated) with Chemed Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemed Corp has no effect on the direction of Outset Medical i.e., Outset Medical and Chemed Corp go up and down completely randomly.

Pair Corralation between Outset Medical and Chemed Corp

Allowing for the 90-day total investment horizon Outset Medical is expected to under-perform the Chemed Corp. In addition to that, Outset Medical is 5.12 times more volatile than Chemed Corp. It trades about -0.05 of its total potential returns per unit of risk. Chemed Corp is currently generating about 0.17 per unit of volatility. If you would invest  52,232  in Chemed Corp on December 27, 2024 and sell it today you would earn a total of  8,685  from holding Chemed Corp or generate 16.63% return on investment over 90 days.

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

Outset Medical  vs.  Chemed Corp

Outset Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Outset Medical 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 primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Chemed Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chemed Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Chemed Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Outset Medical and Chemed Corp

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

The idea behind Outset Medical and Chemed Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.