Correlation Between Tandem Diabetes and New Providence

Can any of the company-specific risk be diversified away by investing in both Tandem Diabetes and New Providence 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 New Providence 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 New Providence Acquisition, you can compare the effects of market volatilities on Tandem Diabetes and New Providence 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 New Providence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tandem Diabetes and New Providence.

Diversification Opportunities for Tandem Diabetes and New Providence

-0.41

Correlation Coefficient

Tandem Diabetes  New Providence

Very good diversification

The 3 months correlation between Tandem and New is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and New Providence Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Providence Acqui 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 New Providence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Providence Acqui has no effect on the direction of Tandem Diabetes i.e., Tandem Diabetes and New Providence go up and down completely randomly.

Pair Corralation between Tandem Diabetes and New Providence

Given the investment horizon of 90 days Tandem Diabetes Care is expected to generate 1.29 times more return on investment than New Providence. However, Tandem Diabetes is 1.29 times more volatile than New Providence Acquisition. It trades about 0.04 of its potential returns per unit of risk. New Providence Acquisition is currently generating about 0.04 per unit of risk. If you would invest  2,830  in Tandem Diabetes Care on October 3, 2024 and sell it today you would earn a total of  772.00  from holding Tandem Diabetes Care or generate 27.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.35%
Values	Daily Returns

Tandem Diabetes Care  vs.  New Providence Acquisition

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 latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

New Providence Acqui

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days New Providence Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady fundamental drivers, New Providence may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tandem Diabetes and New Providence

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

The idea behind Tandem Diabetes Care and New Providence Acquisition 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..