Correlation Between ReShape Lifesciences and Biomerica

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

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

Diversification Opportunities for ReShape Lifesciences and Biomerica

0.51

Correlation Coefficient

ReShape Lifesciences  Biomerica

Very weak diversification

The 3 months correlation between ReShape and Biomerica is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ReShape Lifesciences and Biomerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomerica and ReShape Lifesciences 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 ReShape Lifesciences are associated (or correlated) with Biomerica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomerica has no effect on the direction of ReShape Lifesciences i.e., ReShape Lifesciences and Biomerica go up and down completely randomly.

Pair Corralation between ReShape Lifesciences and Biomerica

Given the investment horizon of 90 days ReShape Lifesciences is expected to generate 1.02 times more return on investment than Biomerica. However, ReShape Lifesciences is 1.02 times more volatile than Biomerica. It trades about -0.05 of its potential returns per unit of risk. Biomerica is currently generating about -0.06 per unit of risk. If you would invest  1,336  in ReShape Lifesciences on October 5, 2024 and sell it today you would lose (895.00) from holding ReShape Lifesciences or give up 66.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

ReShape Lifesciences  vs.  Biomerica

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.

Biomerica

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Biomerica are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Biomerica may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ReShape Lifesciences and Biomerica

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

The idea behind ReShape Lifesciences and Biomerica 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.