Correlation Between Planet Labs and SBC Medical

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

By analyzing existing cross correlation between Planet Labs PBC and SBC Medical Group, you can compare the effects of market volatilities on Planet Labs and SBC 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 Planet Labs with a short position of SBC Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Labs and SBC Medical.

Diversification Opportunities for Planet Labs and SBC Medical

0.63

Correlation Coefficient

Planet Labs  SBC Medical

Poor diversification

The 3 months correlation between Planet and SBC is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Planet Labs PBC and SBC Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBC Medical Group and Planet Labs 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 Planet Labs PBC are associated (or correlated) with SBC Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBC Medical Group has no effect on the direction of Planet Labs i.e., Planet Labs and SBC Medical go up and down completely randomly.

Pair Corralation between Planet Labs and SBC Medical

Allowing for the 90-day total investment horizon Planet Labs PBC is expected to generate 0.85 times more return on investment than SBC Medical. However, Planet Labs PBC is 1.18 times less risky than SBC Medical. It trades about 0.25 of its potential returns per unit of risk. SBC Medical Group is currently generating about 0.06 per unit of risk. If you would invest  314.00  in Planet Labs PBC on September 21, 2024 and sell it today you would earn a total of  94.00  from holding Planet Labs PBC or generate 29.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Planet Labs PBC  vs.  SBC Medical Group

Planet Labs PBC

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Labs PBC are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Planet Labs disclosed solid returns over the last few months and may actually be approaching a breakup point.

SBC Medical Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBC Medical Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, SBC Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Planet Labs and SBC Medical

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

The idea behind Planet Labs PBC and SBC Medical Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.