Correlation Between Outset Medical and DermTech

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

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

Diversification Opportunities for Outset Medical and DermTech

-0.74

Correlation Coefficient

Outset Medical  DermTech

Pay attention - limited upside

The 3 months correlation between Outset and DermTech is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Outset Medical and DermTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DermTech 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 DermTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DermTech has no effect on the direction of Outset Medical i.e., Outset Medical and DermTech go up and down completely randomly.

Pair Corralation between Outset Medical and DermTech

If you would invest  3.65  in DermTech on October 25, 2024 and sell it today you would earn a total of  0.00  from holding DermTech or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	5.56%
Values	Daily Returns

Outset Medical  vs.  DermTech

Outset Medical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Outset Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

DermTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DermTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, DermTech is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Outset Medical and DermTech

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

The idea behind Outset Medical and DermTech 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.