Correlation Between Outset Medical and ModivCare

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

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

Diversification Opportunities for Outset Medical and ModivCare

-0.12

Correlation Coefficient

Outset Medical  ModivCare

Good diversification

The 3 months correlation between Outset and ModivCare is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Outset Medical and ModivCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ModivCare 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 ModivCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ModivCare has no effect on the direction of Outset Medical i.e., Outset Medical and ModivCare go up and down completely randomly.

Pair Corralation between Outset Medical and ModivCare

Allowing for the 90-day total investment horizon Outset Medical is expected to under-perform the ModivCare. In addition to that, Outset Medical is 1.28 times more volatile than ModivCare. It trades about -0.05 of its total potential returns per unit of risk. ModivCare is currently generating about -0.03 per unit of volatility. If you would invest  4,975  in ModivCare on October 3, 2024 and sell it today you would lose (3,791) from holding ModivCare or give up 76.2% of portfolio value over 90 days.

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

Outset Medical  vs.  ModivCare

Outset Medical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 14 (%) 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.

ModivCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ModivCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Outset Medical and ModivCare

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

The idea behind Outset Medical and ModivCare 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.