Correlation Between Vapotherm and Bone Biologics

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

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

Diversification Opportunities for Vapotherm and Bone Biologics

0.44

Correlation Coefficient

Vapotherm  Bone Biologics

Very weak diversification

The 3 months correlation between Vapotherm and Bone is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vapotherm and Bone Biologics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bone Biologics Corp and Vapotherm 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 Vapotherm are associated (or correlated) with Bone Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bone Biologics Corp has no effect on the direction of Vapotherm i.e., Vapotherm and Bone Biologics go up and down completely randomly.

Pair Corralation between Vapotherm and Bone Biologics

Given the investment horizon of 90 days Vapotherm is expected to under-perform the Bone Biologics. But the otc stock apears to be less risky and, when comparing its historical volatility, Vapotherm is 1.71 times less risky than Bone Biologics. The otc stock trades about -0.15 of its potential returns per unit of risk. The Bone Biologics Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  7,111  in Bone Biologics Corp on October 11, 2024 and sell it today you would lose (7,010) from holding Bone Biologics Corp or give up 98.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	25.86%
Values	Daily Returns

Vapotherm  vs.  Bone Biologics Corp

Vapotherm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vapotherm has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vapotherm is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Bone Biologics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bone Biologics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vapotherm and Bone Biologics

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

The idea behind Vapotherm and Bone Biologics Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.