Correlation Between Precipio and Neuronetics

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

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

Diversification Opportunities for Precipio and Neuronetics

0.82

Correlation Coefficient

Precipio  Neuronetics

Very poor diversification

The 3 months correlation between Precipio and Neuronetics is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Precipio and Neuronetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuronetics and Precipio 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 Precipio are associated (or correlated) with Neuronetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuronetics has no effect on the direction of Precipio i.e., Precipio and Neuronetics go up and down completely randomly.

Pair Corralation between Precipio and Neuronetics

Given the investment horizon of 90 days Precipio is expected to generate 5.39 times less return on investment than Neuronetics. But when comparing it to its historical volatility, Precipio is 1.83 times less risky than Neuronetics. It trades about 0.11 of its potential returns per unit of risk. Neuronetics is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  157.00  in Neuronetics on December 5, 2024 and sell it today you would earn a total of  349.00  from holding Neuronetics or generate 222.29% return on investment over 90 days.

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

Precipio  vs.  Neuronetics

Precipio

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Precipio are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Precipio displayed solid returns over the last few months and may actually be approaching a breakup point.

Neuronetics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Neuronetics are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Neuronetics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Precipio and Neuronetics

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

The idea behind Precipio and Neuronetics 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.