Correlation Between ReShape Lifesciences and Rapid Micro

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

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

Diversification Opportunities for ReShape Lifesciences and Rapid Micro

0.18

Correlation Coefficient

ReShape Lifesciences  Rapid Micro

Average diversification

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

Pair Corralation between ReShape Lifesciences and Rapid Micro

Given the investment horizon of 90 days ReShape Lifesciences is expected to under-perform the Rapid Micro. But the stock apears to be less risky and, when comparing its historical volatility, ReShape Lifesciences is 1.14 times less risky than Rapid Micro. The stock trades about -0.27 of its potential returns per unit of risk. The Rapid Micro Biosystems is currently generating about -0.19 of returns per unit of risk over similar time horizon. 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

ReShape Lifesciences  vs.  Rapid Micro Biosystems

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.

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.

Pair Trading with ReShape Lifesciences and Rapid Micro

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

The idea behind ReShape Lifesciences and Rapid Micro Biosystems 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.