Correlation Between Si Bone and Penumbra

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

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

Diversification Opportunities for Si Bone and Penumbra

0.87

Correlation Coefficient

Si Bone  Penumbra

Very poor diversification

The 3 months correlation between SIBN and Penumbra is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Si Bone and Penumbra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penumbra and Si Bone 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 Si Bone are associated (or correlated) with Penumbra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penumbra has no effect on the direction of Si Bone i.e., Si Bone and Penumbra go up and down completely randomly.

Pair Corralation between Si Bone and Penumbra

Given the investment horizon of 90 days Si Bone is expected to generate 1.47 times more return on investment than Penumbra. However, Si Bone is 1.47 times more volatile than Penumbra. It trades about 0.16 of its potential returns per unit of risk. Penumbra is currently generating about 0.11 per unit of risk. If you would invest  1,337  in Si Bone on December 1, 2024 and sell it today you would earn a total of  475.00  from holding Si Bone or generate 35.53% return on investment over 90 days.

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

Si Bone  vs.  Penumbra

Si Bone

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Si Bone are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, Si Bone displayed solid returns over the last few months and may actually be approaching a breakup point.

Penumbra

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Penumbra displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Si Bone and Penumbra

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

The idea behind Si Bone and Penumbra 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.