Correlation Between Rapid Micro and ReShape Lifesciences

Can any of the company-specific risk be diversified away by investing in both Rapid Micro and ReShape Lifesciences 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 ReShape Lifesciences 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 ReShape Lifesciences, you can compare the effects of market volatilities on Rapid Micro and ReShape Lifesciences 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 ReShape Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rapid Micro and ReShape Lifesciences.

Diversification Opportunities for Rapid Micro and ReShape Lifesciences

0.18

Correlation Coefficient

Rapid Micro  ReShape Lifesciences

Average diversification

The 3 months correlation between Rapid and ReShape is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Rapid Micro Biosystems and ReShape Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReShape Lifesciences 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 ReShape Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReShape Lifesciences has no effect on the direction of Rapid Micro i.e., Rapid Micro and ReShape Lifesciences go up and down completely randomly.

Pair Corralation between Rapid Micro and ReShape Lifesciences

Given the investment horizon of 90 days Rapid Micro Biosystems is expected to generate 1.14 times more return on investment than ReShape Lifesciences. However, Rapid Micro is 1.14 times more volatile than ReShape Lifesciences. It trades about -0.19 of its potential returns per unit of risk. ReShape Lifesciences is currently generating about -0.27 per unit of risk. If you would invest  107.00  in Rapid Micro Biosystems on October 5, 2024 and sell it today you would lose (17.00) from holding Rapid Micro Biosystems or give up 15.89% of portfolio value over 90 days.

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

Rapid Micro Biosystems  vs.  ReShape Lifesciences

Rapid Micro Biosystems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rapid Micro Biosystems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Rapid Micro is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ReShape Lifesciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReShape Lifesciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Rapid Micro and ReShape Lifesciences

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

The idea behind Rapid Micro Biosystems and ReShape Lifesciences 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.