Correlation Between Tandem Diabetes and Penumbra

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

Diversification Opportunities for Tandem Diabetes and Penumbra

-0.48

Correlation Coefficient

Tandem Diabetes  Penumbra

Very good diversification

The 3 months correlation between Tandem and Penumbra is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and Penumbra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penumbra 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 Penumbra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penumbra has no effect on the direction of Tandem Diabetes i.e., Tandem Diabetes and Penumbra go up and down completely randomly.

Pair Corralation between Tandem Diabetes and Penumbra

Given the investment horizon of 90 days Tandem Diabetes Care is expected to under-perform the Penumbra. In addition to that, Tandem Diabetes is 1.98 times more volatile than Penumbra. It trades about -0.16 of its total potential returns per unit of risk. Penumbra is currently generating about 0.09 per unit of volatility. If you would invest  23,818  in Penumbra on December 29, 2024 and sell it today you would earn a total of  3,144  from holding Penumbra or generate 13.2% return on investment over 90 days.

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

Tandem Diabetes Care  vs.  Penumbra

Tandem Diabetes Care

Risk-Adjusted Performance

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

Penumbra

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Penumbra displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tandem Diabetes and Penumbra

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

The idea behind Tandem Diabetes Care and Penumbra 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.