Correlation Between Rapid Micro and Co Diagnostics

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

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

Diversification Opportunities for Rapid Micro and Co Diagnostics

-0.53

Correlation Coefficient

Rapid Micro  Co Diagnostics

Excellent diversification

The 3 months correlation between Rapid and CODX is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Rapid Micro Biosystems and Co Diagnostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Co Diagnostics and Rapid Micro 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 Rapid Micro Biosystems are associated (or correlated) with Co Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Co Diagnostics has no effect on the direction of Rapid Micro i.e., Rapid Micro and Co Diagnostics go up and down completely randomly.

Pair Corralation between Rapid Micro and Co Diagnostics

Given the investment horizon of 90 days Rapid Micro Biosystems is expected to generate 1.48 times more return on investment than Co Diagnostics. However, Rapid Micro is 1.48 times more volatile than Co Diagnostics. It trades about 0.22 of its potential returns per unit of risk. Co Diagnostics is currently generating about -0.13 per unit of risk. If you would invest  96.00  in Rapid Micro Biosystems on December 27, 2024 and sell it today you would earn a total of  170.50  from holding Rapid Micro Biosystems or generate 177.6% return on investment over 90 days.

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

Rapid Micro Biosystems  vs.  Co Diagnostics

Rapid Micro Biosystems

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rapid Micro Biosystems are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Rapid Micro exhibited solid returns over the last few months and may actually be approaching a breakup point.

Co Diagnostics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Co Diagnostics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Rapid Micro and Co Diagnostics

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

The idea behind Rapid Micro Biosystems and Co Diagnostics 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.