Correlation Between ReShape Lifesciences and INVO Bioscience

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

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

Diversification Opportunities for ReShape Lifesciences and INVO Bioscience

-0.15

Correlation Coefficient

ReShape Lifesciences  INVO Bioscience

Good diversification

The 3 months correlation between ReShape and INVO is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding ReShape Lifesciences and INVO Bioscience in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVO Bioscience 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 INVO Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INVO Bioscience has no effect on the direction of ReShape Lifesciences i.e., ReShape Lifesciences and INVO Bioscience go up and down completely randomly.

Pair Corralation between ReShape Lifesciences and INVO Bioscience

Given the investment horizon of 90 days ReShape Lifesciences is expected to generate 1.13 times more return on investment than INVO Bioscience. However, ReShape Lifesciences is 1.13 times more volatile than INVO Bioscience. It trades about -0.04 of its potential returns per unit of risk. INVO Bioscience is currently generating about -0.4 per unit of risk. If you would invest  501.00  in ReShape Lifesciences on October 12, 2024 and sell it today you would lose (22.00) from holding ReShape Lifesciences or give up 4.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	47.62%
Values	Daily Returns

ReShape Lifesciences  vs.  INVO Bioscience

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.

INVO Bioscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INVO Bioscience has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ReShape Lifesciences and INVO Bioscience

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

The idea behind ReShape Lifesciences and INVO Bioscience 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.