Correlation Between Penumbra and Orthofix Medical

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

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

Diversification Opportunities for Penumbra and Orthofix Medical

0.03

Correlation Coefficient

Penumbra  Orthofix Medical

Significant diversification

The 3 months correlation between Penumbra and Orthofix is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Penumbra and Orthofix Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orthofix Medical 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 Orthofix Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orthofix Medical has no effect on the direction of Penumbra i.e., Penumbra and Orthofix Medical go up and down completely randomly.

Pair Corralation between Penumbra and Orthofix Medical

Considering the 90-day investment horizon Penumbra is expected to generate 1.76 times more return on investment than Orthofix Medical. However, Penumbra is 1.76 times more volatile than Orthofix Medical. It trades about 0.09 of its potential returns per unit of risk. Orthofix Medical is currently generating about -0.09 per unit of risk. If you would invest  23,818  in Penumbra on December 29, 2024 and sell it today you would earn a total of  2,938  from holding Penumbra or generate 12.34% return on investment over 90 days.

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

Penumbra  vs.  Orthofix Medical

Penumbra

Risk-Adjusted Performance

OK

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.

Orthofix Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orthofix Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Penumbra and Orthofix Medical

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

The idea behind Penumbra and Orthofix Medical 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.