Correlation Between Perimeter Medical and Arch Biopartners

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

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

Diversification Opportunities for Perimeter Medical and Arch Biopartners

-0.2

Correlation Coefficient

Perimeter Medical  Arch Biopartners

Good diversification

The 3 months correlation between Perimeter and Arch is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Perimeter Medical Imaging and Arch Biopartners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Biopartners and Perimeter 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 Perimeter Medical Imaging are associated (or correlated) with Arch Biopartners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Biopartners has no effect on the direction of Perimeter Medical i.e., Perimeter Medical and Arch Biopartners go up and down completely randomly.

Pair Corralation between Perimeter Medical and Arch Biopartners

Assuming the 90 days trading horizon Perimeter Medical Imaging is expected to generate 4.55 times more return on investment than Arch Biopartners. However, Perimeter Medical is 4.55 times more volatile than Arch Biopartners. It trades about 0.08 of its potential returns per unit of risk. Arch Biopartners is currently generating about -0.03 per unit of risk. If you would invest  37.00  in Perimeter Medical Imaging on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Perimeter Medical Imaging or generate 21.62% return on investment over 90 days.

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

Perimeter Medical Imaging  vs.  Arch Biopartners

Perimeter Medical Imaging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Perimeter Medical Imaging are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Perimeter Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Arch Biopartners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arch Biopartners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Arch Biopartners is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Perimeter Medical and Arch Biopartners

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

The idea behind Perimeter Medical Imaging and Arch Biopartners 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.