Correlation Between STRATA Skin and ReShape Lifesciences

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

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

Diversification Opportunities for STRATA Skin and ReShape Lifesciences

0.26

Correlation Coefficient

STRATA Skin  ReShape Lifesciences

Modest diversification

The 3 months correlation between STRATA and ReShape is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding STRATA Skin Sciences and ReShape Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReShape Lifesciences and STRATA Skin 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 STRATA Skin Sciences are associated (or correlated) with ReShape Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReShape Lifesciences has no effect on the direction of STRATA Skin i.e., STRATA Skin and ReShape Lifesciences go up and down completely randomly.

Pair Corralation between STRATA Skin and ReShape Lifesciences

Given the investment horizon of 90 days STRATA Skin Sciences is expected to generate 0.52 times more return on investment than ReShape Lifesciences. However, STRATA Skin Sciences is 1.91 times less risky than ReShape Lifesciences. It trades about -0.07 of its potential returns per unit of risk. ReShape Lifesciences is currently generating about -0.27 per unit of risk. If you would invest  300.00  in STRATA Skin Sciences on October 5, 2024 and sell it today you would lose (9.00) from holding STRATA Skin Sciences or give up 3.0% of portfolio value over 90 days.

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

STRATA Skin Sciences  vs.  ReShape Lifesciences

STRATA Skin Sciences

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STRATA Skin Sciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward-looking signals, STRATA Skin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with STRATA Skin and ReShape Lifesciences

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

The idea behind STRATA Skin Sciences and ReShape Lifesciences 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.