Correlation Between Tela Bio and Treace Medical

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

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

Diversification Opportunities for Tela Bio and Treace Medical

0.12

Correlation Coefficient

Tela Bio  Treace Medical

Average diversification

The 3 months correlation between Tela and Treace is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Tela Bio 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 Tela Bio 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 Tela Bio 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 Tela Bio i.e., Tela Bio and Treace Medical go up and down completely randomly.

Pair Corralation between Tela Bio and Treace Medical

Given the investment horizon of 90 days Tela Bio is expected to under-perform the Treace Medical. In addition to that, Tela Bio is 1.43 times more volatile than Treace Medical Concepts. It trades about -0.18 of its total potential returns per unit of risk. Treace Medical Concepts is currently generating about 0.09 per unit of volatility. If you would invest  698.00  in Treace Medical Concepts on December 27, 2024 and sell it today you would earn a total of  139.00  from holding Treace Medical Concepts or generate 19.91% return on investment over 90 days.

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

Tela Bio  vs.  Treace Medical Concepts

Tela Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tela Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Treace Medical Concepts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Treace Medical Concepts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Treace Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tela Bio and Treace Medical

The main advantage of trading using opposite Tela Bio and Treace Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tela Bio 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 Tela Bio 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.