Correlation Between Therasense and LMF Acquisition

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

By analyzing existing cross correlation between Therasense and LMF Acquisition Opportunities, you can compare the effects of market volatilities on Therasense and LMF Acquisition 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 Therasense with a short position of LMF Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Therasense and LMF Acquisition.

Diversification Opportunities for Therasense and LMF Acquisition

0.0

Correlation Coefficient

Therasense  LMF Acquisition

Pay attention - limited upside

The 3 months correlation between Therasense and LMF is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Therasense and LMF Acquisition Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LMF Acquisition Oppo and Therasense 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 Therasense are associated (or correlated) with LMF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LMF Acquisition Oppo has no effect on the direction of Therasense i.e., Therasense and LMF Acquisition go up and down completely randomly.

Pair Corralation between Therasense and LMF Acquisition

Given the investment horizon of 90 days Therasense is expected to generate 1.13 times more return on investment than LMF Acquisition. However, Therasense is 1.13 times more volatile than LMF Acquisition Opportunities. It trades about 0.01 of its potential returns per unit of risk. LMF Acquisition Opportunities is currently generating about -0.03 per unit of risk. If you would invest  0.34  in Therasense on October 9, 2024 and sell it today you would lose (0.33) from holding Therasense or give up 97.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Therasense  vs.  LMF Acquisition Opportunities

Therasense

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Therasense has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Therasense is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

LMF Acquisition Oppo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LMF Acquisition Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Therasense and LMF Acquisition

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

The idea behind Therasense and LMF Acquisition Opportunities 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.