Correlation Between Silk Road and Si Bone

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

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

Diversification Opportunities for Silk Road and Si Bone

-0.04

Correlation Coefficient

Silk Road  Si Bone

Good diversification

The 3 months correlation between Silk and SIBN is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Silk Road Medical and Si Bone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Si Bone and Silk Road 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 Silk Road Medical are associated (or correlated) with Si Bone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Si Bone has no effect on the direction of Silk Road i.e., Silk Road and Si Bone go up and down completely randomly.

Pair Corralation between Silk Road and Si Bone

Given the investment horizon of 90 days Silk Road Medical is expected to generate 1.16 times more return on investment than Si Bone. However, Silk Road is 1.16 times more volatile than Si Bone. It trades about 0.17 of its potential returns per unit of risk. Si Bone is currently generating about -0.01 per unit of risk. If you would invest  713.00  in Silk Road Medical on October 5, 2024 and sell it today you would earn a total of  2,036  from holding Silk Road Medical or generate 285.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.06%
Values	Daily Returns

Silk Road Medical  vs.  Si Bone

Silk Road Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silk Road Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Silk Road is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Si Bone

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Si Bone are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, Si Bone may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Silk Road and Si Bone

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

The idea behind Silk Road Medical and Si Bone 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.