Correlation Between Silk Road and Treace Medical

Can any of the company-specific risk be diversified away by investing in both Silk Road and Treace Medical 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 Treace Medical 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 Treace Medical Concepts, you can compare the effects of market volatilities on Silk Road and Treace Medical 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 Treace Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silk Road and Treace Medical.

Diversification Opportunities for Silk Road and Treace Medical

0.34

Correlation Coefficient

Silk Road  Treace Medical

Weak diversification

The 3 months correlation between Silk and Treace is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Silk Road Medical and Treace Medical Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treace Medical Concepts 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 Treace Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treace Medical Concepts has no effect on the direction of Silk Road i.e., Silk Road and Treace Medical go up and down completely randomly.

Pair Corralation between Silk Road and Treace Medical

Given the investment horizon of 90 days Silk Road Medical is expected to generate 0.59 times more return on investment than Treace Medical. However, Silk Road Medical is 1.7 times less risky than Treace Medical. It trades about 0.17 of its potential returns per unit of risk. Treace Medical Concepts is currently generating about 0.02 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 Together
Strength	Very Weak
Accuracy	78.06%
Values	Daily Returns

Silk Road Medical  vs.  Treace Medical Concepts

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.

Treace Medical Concepts

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Treace Medical Concepts are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Treace Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Silk Road and Treace Medical

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

The idea behind Silk Road Medical and Treace Medical Concepts 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.