Correlation Between Tandem Diabetes and ODDITY Tech

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

Diversification Opportunities for Tandem Diabetes and ODDITY Tech

-0.63

Correlation Coefficient

Tandem Diabetes  ODDITY Tech

Excellent diversification

The 3 months correlation between Tandem and ODDITY is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and ODDITY Tech Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODDITY Tech 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 ODDITY Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODDITY Tech has no effect on the direction of Tandem Diabetes i.e., Tandem Diabetes and ODDITY Tech go up and down completely randomly.

Pair Corralation between Tandem Diabetes and ODDITY Tech

Given the investment horizon of 90 days Tandem Diabetes Care is expected to generate 1.03 times more return on investment than ODDITY Tech. However, Tandem Diabetes is 1.03 times more volatile than ODDITY Tech Ltd. It trades about 0.19 of its potential returns per unit of risk. ODDITY Tech Ltd is currently generating about 0.16 per unit of risk. If you would invest  2,967  in Tandem Diabetes Care on September 14, 2024 and sell it today you would earn a total of  464.00  from holding Tandem Diabetes Care or generate 15.64% return on investment over 90 days.

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

Tandem Diabetes Care  vs.  ODDITY Tech Ltd

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 conflicting performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ODDITY Tech

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ODDITY Tech Ltd are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, ODDITY Tech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tandem Diabetes and ODDITY Tech

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

The idea behind Tandem Diabetes Care and ODDITY Tech Ltd 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.