Correlation Between Rxsight and Tela Bio

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

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

Diversification Opportunities for Rxsight and Tela Bio

-0.28

Correlation Coefficient

Rxsight  Tela Bio

Very good diversification

The 3 months correlation between Rxsight and Tela is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Rxsight and Tela Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tela Bio and Rxsight 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 Rxsight are associated (or correlated) with Tela Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tela Bio has no effect on the direction of Rxsight i.e., Rxsight and Tela Bio go up and down completely randomly.

Pair Corralation between Rxsight and Tela Bio

Given the investment horizon of 90 days Rxsight is expected to under-perform the Tela Bio. But the stock apears to be less risky and, when comparing its historical volatility, Rxsight is 1.55 times less risky than Tela Bio. The stock trades about -0.08 of its potential returns per unit of risk. The Tela Bio is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  276.00  in Tela Bio on September 2, 2024 and sell it today you would earn a total of  38.00  from holding Tela Bio or generate 13.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Rxsight  vs.  Tela Bio

Rxsight

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rxsight has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Tela Bio

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tela Bio are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile essential indicators, Tela Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rxsight and Tela Bio

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

The idea behind Rxsight and Tela Bio 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.