Correlation Between ReShape Lifesciences and Heart Test

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

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

Diversification Opportunities for ReShape Lifesciences and Heart Test

-0.09

Correlation Coefficient

ReShape Lifesciences  Heart Test

Good diversification

The 3 months correlation between ReShape and Heart is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding ReShape Lifesciences and Heart Test Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heart Test Laboratories 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 Heart Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heart Test Laboratories has no effect on the direction of ReShape Lifesciences i.e., ReShape Lifesciences and Heart Test go up and down completely randomly.

Pair Corralation between ReShape Lifesciences and Heart Test

Given the investment horizon of 90 days ReShape Lifesciences is expected to under-perform the Heart Test. But the stock apears to be less risky and, when comparing its historical volatility, ReShape Lifesciences is 31.11 times less risky than Heart Test. The stock trades about -0.06 of its potential returns per unit of risk. The Heart Test Laboratories is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Heart Test Laboratories on November 28, 2024 and sell it today you would lose (0.95) from holding Heart Test Laboratories or give up 19.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	37.39%
Values	Daily Returns

ReShape Lifesciences  vs.  Heart Test Laboratories

ReShape Lifesciences

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Heart Test Laboratories

Risk-Adjusted Performance

Modest

Over the last 90 days Heart Test Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain basic indicators, Heart Test showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ReShape Lifesciences and Heart Test

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

The idea behind ReShape Lifesciences and Heart Test Laboratories 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.