Correlation Between Penumbra and LivaNova PLC

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

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

Diversification Opportunities for Penumbra and LivaNova PLC

-0.49

Correlation Coefficient

Penumbra  LivaNova PLC

Very good diversification

The 3 months correlation between Penumbra and LivaNova is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Penumbra and LivaNova PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LivaNova PLC and Penumbra 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 Penumbra are associated (or correlated) with LivaNova PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LivaNova PLC has no effect on the direction of Penumbra i.e., Penumbra and LivaNova PLC go up and down completely randomly.

Pair Corralation between Penumbra and LivaNova PLC

Considering the 90-day investment horizon Penumbra is expected to generate 1.19 times more return on investment than LivaNova PLC. However, Penumbra is 1.19 times more volatile than LivaNova PLC. It trades about 0.2 of its potential returns per unit of risk. LivaNova PLC is currently generating about -0.09 per unit of risk. If you would invest  19,081  in Penumbra on October 7, 2024 and sell it today you would earn a total of  5,116  from holding Penumbra or generate 26.81% return on investment over 90 days.

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

Penumbra  vs.  LivaNova PLC

Penumbra

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Penumbra displayed solid returns over the last few months and may actually be approaching a breakup point.

LivaNova PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LivaNova PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Penumbra and LivaNova PLC

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

The idea behind Penumbra and LivaNova PLC 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.