Correlation Between Tandem Diabetes and Masimo

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

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

Diversification Opportunities for Tandem Diabetes and Masimo

-0.86

Correlation Coefficient

Tandem Diabetes  Masimo

Pay attention - limited upside

The 3 months correlation between Tandem and Masimo is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and Masimo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masimo and Tandem Diabetes 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 Tandem Diabetes Care are associated (or correlated) with Masimo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masimo has no effect on the direction of Tandem Diabetes i.e., Tandem Diabetes and Masimo go up and down completely randomly.

Pair Corralation between Tandem Diabetes and Masimo

Given the investment horizon of 90 days Tandem Diabetes Care is expected to under-perform the Masimo. In addition to that, Tandem Diabetes is 1.3 times more volatile than Masimo. It trades about -0.14 of its total potential returns per unit of risk. Masimo is currently generating about 0.28 per unit of volatility. If you would invest  11,402  in Masimo on September 1, 2024 and sell it today you would earn a total of  5,852  from holding Masimo or generate 51.32% return on investment over 90 days.

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

Tandem Diabetes Care  vs.  Masimo

Tandem Diabetes Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tandem Diabetes Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Masimo

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Masimo are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Masimo demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tandem Diabetes and Masimo

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

The idea behind Tandem Diabetes Care and Masimo 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..