Correlation Between ReShape Lifesciences and NeuroMetrix

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

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

Diversification Opportunities for ReShape Lifesciences and NeuroMetrix

-0.23

Correlation Coefficient

ReShape Lifesciences  NeuroMetrix

Very good diversification

The 3 months correlation between ReShape and NeuroMetrix is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ReShape Lifesciences and NeuroMetrix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeuroMetrix 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 NeuroMetrix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeuroMetrix has no effect on the direction of ReShape Lifesciences i.e., ReShape Lifesciences and NeuroMetrix go up and down completely randomly.

Pair Corralation between ReShape Lifesciences and NeuroMetrix

Given the investment horizon of 90 days ReShape Lifesciences is expected to under-perform the NeuroMetrix. In addition to that, ReShape Lifesciences is 2.04 times more volatile than NeuroMetrix. It trades about -0.08 of its total potential returns per unit of risk. NeuroMetrix is currently generating about 0.04 per unit of volatility. If you would invest  382.00  in NeuroMetrix on September 5, 2024 and sell it today you would earn a total of  23.00  from holding NeuroMetrix or generate 6.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

ReShape Lifesciences  vs.  NeuroMetrix

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

NeuroMetrix

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NeuroMetrix are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, NeuroMetrix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ReShape Lifesciences and NeuroMetrix

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

The idea behind ReShape Lifesciences and NeuroMetrix 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.