Correlation Between Tactile Systems and LivaNova PLC

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

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

Diversification Opportunities for Tactile Systems and LivaNova PLC

-0.47

Correlation Coefficient

Tactile Systems  LivaNova PLC

Very good diversification

The 3 months correlation between Tactile and LivaNova is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tactile Systems Technology and LivaNova PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LivaNova PLC and Tactile Systems 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 Tactile Systems Technology are associated (or correlated) with LivaNova PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LivaNova PLC has no effect on the direction of Tactile Systems i.e., Tactile Systems and LivaNova PLC go up and down completely randomly.

Pair Corralation between Tactile Systems and LivaNova PLC

Given the investment horizon of 90 days Tactile Systems Technology is expected to generate 1.04 times more return on investment than LivaNova PLC. However, Tactile Systems is 1.04 times more volatile than LivaNova PLC. It trades about -0.13 of its potential returns per unit of risk. LivaNova PLC is currently generating about -0.17 per unit of risk. If you would invest  1,836  in Tactile Systems Technology on October 8, 2024 and sell it today you would lose (83.00) from holding Tactile Systems Technology or give up 4.52% of portfolio value over 90 days.

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

Tactile Systems Technology  vs.  LivaNova PLC

Tactile Systems Tech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tactile Systems Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Tactile Systems exhibited solid returns over the last few months and may actually be approaching a breakup point.

LivaNova PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LivaNova PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Tactile Systems and LivaNova PLC

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

The idea behind Tactile Systems Technology and LivaNova PLC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.