Correlation Between Penumbra and Nevro Corp

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

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

Diversification Opportunities for Penumbra and Nevro Corp

0.8

Correlation Coefficient

Penumbra  Nevro Corp

Very poor diversification

The 3 months correlation between Penumbra and Nevro is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Penumbra and Nevro Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nevro Corp 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 Nevro Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nevro Corp has no effect on the direction of Penumbra i.e., Penumbra and Nevro Corp go up and down completely randomly.

Pair Corralation between Penumbra and Nevro Corp

Considering the 90-day investment horizon Penumbra is expected to generate 3.7 times less return on investment than Nevro Corp. But when comparing it to its historical volatility, Penumbra is 1.66 times less risky than Nevro Corp. It trades about 0.09 of its potential returns per unit of risk. Nevro Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  372.00  in Nevro Corp on December 28, 2024 and sell it today you would earn a total of  212.00  from holding Nevro Corp or generate 56.99% return on investment over 90 days.

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

Penumbra  vs.  Nevro Corp

Penumbra

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 6 (%) 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.

Nevro Corp

Risk-Adjusted Performance

Good

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

Pair Trading with Penumbra and Nevro Corp

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

The idea behind Penumbra and Nevro 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..